The projected cost of the proposed health care reform, including how it will affect the budget and economy

Introduction

The United States spends an estimated $2 trillion annually on healthcare expenses, more than any other industrialized country. According to data from the Organization for Economic Cooperation and Development (OECD), the United States spends two-and-a-half times more than the OECD average, and yet ranks with Turkey and Mexico as the only OECD countries without universal health coverage. Some analysts say an increasing number of U.S. businesses are less competitive globally because of ballooning healthcare costs. U.S. economic woes have heightened the burden of healthcare costs both on individuals and businesses. The U.S. healthcare reform law signed by President Barack Obama on March 23, 2010, includes measures aimed at making healthcare less expensive and more accessible, including upgrades to government-run Medicare and Medicaid. Still, reforming healthcare has proved politically divisive, especially over the option to expand social medicine, as well as new mandates on employers and individuals. Whether these reforms will reduce the healthcare-cost burden on U.S. industry remains under debate.

The Congress has recently approved major health care legislation in the form of two pieces of legislation: the Patient Protection and Affordable Care Act (PPACA, Public Law 111-148); and, following that, the Health Care and Education Reconciliation Act of 2010 (H.R. 4872), which made a number of changes to provisions of PPACA along with significant changes to the federal postsecondary education programs.

On March 20, 2010, CBO released its final cost estimate for the reconciliation act, which encompassed the effects of both pieces of legislation. Table 1 (on page 5) provides a broad summary and Table 2 offers a detailed breakdown of the budgetary effects of the two pieces of legislation. CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting both pieces of legislation will produce a net reduction in federal deficits of $143 billion over the 2010-2019 period. About $124 billion of that savings stems from provisions dealing with health care and federal revenues; the other $19 billion results from the education provisions. Those figures do not include potential costs that would be funded through future appropriations (those are discussed on pages 10-11 of the cost estimate) (www.thenation.com).

Discussion

Aside from Democratic cheers, there was no immediate sign that the passage of healthcare reform last night will have a major impact. (No, the socialist utopia has not yet begun.) But, ...