How big is the bill, really?

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A Rounding Error In The Right Direction

I will dispense with the health care issue today. This is the last of my 3 posts on the subject—I promise. There are so many other disasters to cover, so I need to get this one out of the way. Let's start with Ezra Klein's How big is the bill, really?

We should start by putting the health-care bill into proper perspective. Opponents and supports of the bill have both profited immensely from exploiting the average person's inability to put billions and trillions into context. So let's begin by breaking down the numbers. The $900 billion price tag is repeated with the regularity of a rooster's crow. That's a shame, as the number is, somewhat impressively, misleading in both directions.

On the one hand, that $900 billion—or, more precisely, $940 billion in the final legislation—is stretched over 10 years.

Klein's point is that compared to the projected amount the U.S. will spend on health care in future years, costs measured in billions are insignificant. He's right.

Health_expenditures So that's really what we're talking about here—a large health-care expansion that's a slight fraction of overall spending. The graph on the right tells the tale (though the $175 billion refers to the Senate bill; the reconciliation fixes increase the 2018 spending to about $200 billion, which is no different for the purposes of the image).

Let's go even further: It's an expansion that most people won't notice in 10 years. According to the Congressional Budget Office, the Senate bill will change the insurance of about 40 million people by 2019, about 30 million of whom would have been otherwise uninsured. The other 10 million will come from the employer or individual markets in search of more affordable options. About 23 million people will still be uninsured, many of them illegal immigrants. About 90 percent of Americans will be exactly where they'd be if this reform had never passed.

That accounts for the spending side of the bill. What about the cost control?

It's the same story, but more so. Although the bill solves most of the coverage problem, it accounts for a mere fraction of the cost problem. A report by the centrist policy group Third Way estimated that the Senate legislation would save more than $800 billion over the next 15 years. That's consistent with the CBO's expectation that the Senate legislation and the reconciliation fixes would save more than a trillion dollars over the next 20 years.

That's a big number. Quite a bit more than my car cost, and I thought my car cost a lot of money. But the savings amounts to no more than a rounding error given the tens of trillions of dollars we're going to spend over that period. It's half of 1 percent of expected GDP.

Importantly, though, it's a rounding error in the right direction... We're doing a lot on health-care reform this year, but we're not doing that much. And we shouldn't fool ourselves into thinking otherwise. We'll be back at this again, and soon.

The graph indicates that national health spending is projected to be $4,530,000,000,000 (trillions) in 2018, an increase of about $2,000,000,000,000 over the 2010 levels. That's with health care reform, which the CBO estimates will save $138,000,000,000 (billions) over the next 10 years. Thus on the cost containment issue, we have accomplished a rounding error in the right direction. As Klein says, we haven't done much, and we desperately need to revisit this issue soon. After the mid-term elections, what do you think the chances are the Congress will revisit this issue?

Leaving aside the murky problem of what future GDP will be, we should remember that regardless of the numbers, health care expenditures account for more and more of it. Health spending, which never goes down—not even during the "Great" Post-Housing Bubble recession—accounts for far more of U.S. GDP percentage-wise than it does in any other advanced (OECD) economy. Naturally, this includes the ones with "socialized" medicine and universal coverage.

Health_percent_of_gdp
Source: New York Times That blue line above the pack is the United States


Source: Calculated Risk

Here at DOTE, we know the difference between a billion dollars ($1,000,000,000) and a trillion dollars ($1,000,000,000,000). I'm sure our young people are looking forward to the day when the older half the population is receiving medical treatment and the younger half is
dispensing it.

Meanwhile, when you see pictures like this one—

Health_care_celebration
The Democrats celebrate the fact that they DID SOMETHING

—try to remember we still live in a Banana Republic. Even though we extended medical coverage at relatively little cost, we're still up shit creek without a paddle from the absurd overall costs standpoint. And the National Debt Clock never stops ticking.

What do you think? Leave a comment below.

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