According to a pair of Capitol Hill sources, preliminary estimates from the Congressional Budget Office suggest that a strong public option--the kind that the House of Representatives is putting in its reform bill--should net somewhere in the neighborhood of $150 billion in savings over ten years.I've written previously about how both the Senate HELP Committee bill and the House bill wrote the rules determining the amount of subsidies given to individuals to help them afford insurance was structured so that the Congressional Budget Office would score a strong public plan as saving large amounts of money.
I'm very pleased with these preliminary results from the CBO and they are right in line with my estimates. Last month, I calculated that a strong Medicare buy-in public option would make the HELP bill score between $200-$250 billion cheaper. The House bill has slight less generous subsidies than the previous version of the HELP bill I used to come up with my estimates. I'm also under the impression that the strong public plan scored by the CBO was not paying Medicare rates but Medicare rates plus 5-10%. These two factors should account for most of the difference between my estimate and the preliminary estimate from the CBO.
The only unfortunate piece of news is that my estimate was based on the assumption that the CBO would be unable/unwilling to calculate what effect competition from public option would have on reducing the cost of insurance from private insurance companies. It unfortunately appears that my assumption may have been correct. This mean the CBO is in fact understating the potential savings from a robust public option.
Overall this is all very good news and should greatly increase the chance that health care reform includes a strong public option. It is possible that Peter Orzag and Barack Obama were expecting these results from the CBO this whole time. Their focus on savings may have been part of a trap to trip up the opponents of a robust public plan. Of course, we also need to hope that the CBO doesn't conclude that a strong public plan would end up “dominating” the exchange.