The Health Care Reform Already Costs More Than We Thought It Would

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There's been a spate of bad news recently about the health care bill. 

Henry Waxman canceled his War on Accounting, not because there was a sudden breakout of common sense on Capitol Hill, but because his committee's investigation revealed that companies had begun exploring whether they should drop their health insurance plans entirely--a move that would cost over $100 billion thanks to the huge new subsidies the government would have to dole out.

Meanwhile, the CBO just came out and said that the health care reform was slated to cost $115 billion more than they said it would.  Why?  Because they didn't have time to calculate the effects on discretionary spending such as new administrative capacity, demonstration projects, and continuation of successful short-term initiatives.  As my fiance notes, Olympia Snowe's demands to slow down the process suddenly seem a lot more reasonable.

The progressive response on this, as I understand it, is threefold: 

  1. We don't have to fund this stuff
  2. Maybe we'll cut something else to fund this stuff
  3. C'mon, who cares?

Predictably, I find none of these convincing.  Some of the stuff we do have to fund, because the agencies are going to have to have staff to deal with the new requirements; and the stuff we don't have to fund is the demonstration projects that I was assured were going to bend the cost curve.  So if we save this money in the first ten years, we lose the possibility of lower cost growth after the first decade.

What's really worrisome, however, is that I'm unaware of any happy surprises where it turns out this thing is going to cost less than expected.  It's early days, yet, of course--but it's a little too early to take rapidly mounting cost projections in stride.  We haven't done anything yet, and we're somehow already at least $100 billion in the hole.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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