Congressional Budget Office
Joint Committee on Taxation
May 1, 2008
At your request, the staffs of our two organizations have collaborated on a preliminary analysis of a modified proposal for comprehensive health insurance based on S. 334, the “Healthy Americans Act,” which you introduced last year. That modified proposal includes various clarifications and changes that you have indicated you would like to examine as part of the consideration of that bill.
Attachment B – Key Differences Between the Current Proposal and S. 334
The minimum value of covered benefits that all participating health plans had to provide would initially be set equal to the value of the Blue Cross/Blue Shield standard option offered to Federal employees in 2011; in future years, that average value would be indexed to the overall growth rate of gross domestic product per capita.
The premiums collected through the tax system — and the premium subsidy for lower-income households — would be tied to the cost of the least expensive plan available in an area that provided the required benefits, not to the average premium amount. Individuals could choose a more expensive health plan or one with more extensive benefits, but amounts in excess of that lowest-cost premium would not be collected through the tax system or be liabilities of the Federal government.
The new tax deduction would be a fixed amount per year and would not vary with the premium of the insurance policy actually purchased.
http://www.cbo.gov/ftpdocs/91xx/doc9184/05-01-HealthCare-Letter.pdf#page=5
Comment:
By Don McCanne, MD
S. 334, the Wyden/Bennett Healthy Americans Act, would “require individuals to purchase private health insurance and to establish state-run purchasing pools and a system of Federal premium collections and subsidies to facilitate those purchases.”
Although the bill has provisions that nominally would slow the increase in health care costs, they are similar to the cost-containing provisions of the proposals of the presidential candidates that actually would have very little impact, if any, on slowing cost escalation. It became apparent that adjustments would have to be made in S. 334 to prevent increasing demands on future federal budgets.
Under this proposal, the value of the basic standard option would be indexed to the overall growth rate of the gross domestic product (GDP). Since the growth rate of actual health care costs has always exceeded the growth rate of the GDP, the difference between actual costs and GDP growth will have to be met either by a reduction in the benefits of the basic option or by an increase in the premium paid by the insured, or by a combination of both. This has the impact of shifting some of the responsibility of paying for care from pooled government funds to the individual.
The premiums to be collected would no longer be tied to the average premium amount as they would have been in the original proposal, but they would be tied to the least expensive plan available. The difference between the minimum premium and the average premium would have to be paid by the individual. This also has the impact of shifting some of the responsibility of paying for care from pooled government funds to the individual.
Since the tax deduction allowed would be a fixed amount rather than varying with the premium, the difference would lose its tax advantage and shift more costs to the individual. Once again, this has the impact of shifting some of the responsibility of paying for care from pooled government funds to the individual.
Over time, health care spending for the government would be stabilized to a greater degree, but at the cost of shifting more of the responsibility of paying for care to the individual.
What we really need is a system that removes the financial burden from patients and more effectively pools our funds into a public program that is able to address costs much more effectively by introducing greater efficiency and value into our health care system. Depending on private plans, while placing a lid on government spending, won’t do it.