Wash. Post column cites inapplicable CBO assessment to claim public plan option has "huge cost, minor benefit"

In a July 7 Washington Post column, Fortune magazine senior editor at large Geoff Colvin falsely suggested that a June 15 Congressional Budget Office (CBO) estimate of the Senate Health Committee's health care reform bill demonstrated that a public insurance option would come at a "huge cost" for a "minor benefit" in the number insured. In fact, the report Colvin cited was a preliminary analysis of an incomplete version of the bill, which did not include a public option. Moreover, Colvin did not note that CBO has since released a July 2 score of what Sen. Edward M. Kennedy (D-MA), the committee chairman, referred to as the "complete bill," which found greater coverage of uninsured for a lower cost than the prior score. It also found that, in the words of CBO director Douglas W. Elmendorf, the public option "did not have a substantial effect on the cost ... projection."

After citing a poll that found that Americans support the creation of a public option "by more than 3 to 1," Colvin wrote that "the respondents in that poll were opining about an idea, not hard facts." He continued:

Only after most of the polling was complete did the Congressional Budget Office release its bombshell evaluation of Sen. Edward M. Kennedy's reform bill, which would just begin to do what the poll respondents so enthusiastically favored. The report's sobering bottom line: The bill would increase the federal deficit by $1 trillion over the next decade yet make only a dent in the number of uninsured, who would decline from 19 percent of the non-elderly population to 13 percent.

That combination -- huge cost, minor benefit -- is probably not what most people thought they'd be getting.

But in a letter accompanying the June 15 CBO analysis to which Colvin referred, Elmendorf wrote that CBO's cost figures "do not represent a formal or complete cost estimate for the draft legislation" [emphasis in original]. He continued: "The draft legislation released by the HELP [Health, Education, Labor, and Pensions] Committee ... indicates that certain features may be added at a later date. Because they are not reflected in the current draft, however, CBO and the JCT [Joint Committee on Taxation] staff did not take them into account." In particular, Elmendorf wrote: "The draft legislation ... indicates that the committee is considering whether to incorporate other features, including a 'public health insurance option' and requirements for 'shared responsibility' by employers. Depending on their details, such provisions could ... have substantial effects on our analysis."

Moreover, more people would be insured at a lower cost according to CBO's July 2 score of the HELP bill compared to the June 15 score of the incomplete bill. The June 15 estimate found that the bill would cost approximately $1 trillion and that 16 million fewer people would be uninsured compared to current law in 2019. The July 2 estimate found that the bill would cost roughly $611 billion and that 20 million fewer people would be uninsured compared to current law that year.

Elmendorf further explained in a July 2 letter to Kennedy about the score that the public option "did not have a substantial effect on the cost or enrollment projections, largely because the public plan would pay providers of health care at rates comparable to privately negotiated rates -- and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges."

From Colvin's column:

The latest polling data look great for President Obama: The numbers show that Americans love national health care. But if history and polling trends are any guide, however, that will change.

Voters right now are in what pollster Daniel Yankelovich called the Wishful Thinking stage -- a moment in the life of an opinion analogous to the dreamy early days of a relationship. Yankelovich believed that opinion evolved through seven stages: Dawning Awareness, Greater Urgency, Reaching for Solutions, Wishful Thinking, Weighing the Choices, Taking a Stand and Making a Responsible Judgment. In the next few weeks, when voters discover what national health care will cost and how it could affect their own care, romance will give way to reality.

Americans favor by more than 3 to 1 "the government offering everyone a government-administered health insurance plan that would compete with private health insurance plans" and other large-scale federal initiatives. At least that's what they thought as of mid-June in a New York Times-CBS News poll. But the respondents in that poll were opining about an idea, not hard facts.

Only after most of the polling was complete did the Congressional Budget Office release its bombshell evaluation of Sen. Edward M. Kennedy's reform bill, which would just begin to do what the poll respondents so enthusiastically favored. The report's sobering bottom line: The bill would increase the federal deficit by $1 trillion over the next decade yet make only a dent in the number of uninsured, who would decline from 19 percent of the non-elderly population to 13 percent.

That combination -- huge cost, minor benefit -- is probably not what most people thought they'd be getting. Another bill, from the Senate Finance Committee, would cost still more. Legislators are scrambling for fixes, but even if they find them, they'll face a separate problem. Health-care reform is going to cost major dollars no matter what, and those dollars will have to be extracted mainly from those most able to pay: the top-earning 40 percent of the population. When these top earners figure out that they're being asked during a recession to shell out more -- through increased taxes, higher insurance premiums or other mechanisms -- for benefits that will go mostly to others, they won't be happy. And that top 40 percent knows how to make itself heard in Washington.