Kennedy Gaming The CBO To Promote A Strong Public Option
Previously, I described how Ted Kennedy could structure the subsidies for individuals buying private health insurance in a way that would make a powerful case for a strong public health insurance option. The first draft of the HELP committee's bill has been released, and it seems that I was right on the money.
Individuals making less than 500% the poverty line will be given subsidies to help them buy health insurance. The amount of subsidies individuals will receive will be based on their income level and the cost of the “reference premium”. The reference premium with be the “weighted average annual premium of the 3 lowest cost qualified health plans” in the area. The cheaper the plans offered, the less the subsidies will be.
The public health insurance option in the HELP bill will almost always be among the three cheapest plans, if not the cheapest qualified plan offered. The public option will bring down the price of the “reference premium”. Offering a cheap public plan reduces the cost of subsidies the government will need to provide people.
When the CBO (Congressional Budget Office) scores the HELP committee's bill with and without the public option, it will score the bill with the public option as being dramatically cheaper than the cost of the plan without the public option. If the subsidies being offered to individuals were based on anything else (a flat number, consumer price index, federal poverty line, etc), the CBO would not score the public option as reducing the cost to the government.
Since the HELP draft bill does not contain a number, it is currently impossible to determine how much cheaper the public option will make the bill. Using some back of the envelope calculations, I would not be surprised if the public option made the HELP bill around $15 billion cheaper in year one, with the amount of savings increasing each year.
The take away message is this: Kennedy's plan structures health care reform so that if the average American saves money on health insurance, the government saves money. Anything which drives down the cost of premiums for individuals drives down the cost for the government. The government will now have a huge financial interest in reducing everyone's health care premium.