There are so many numbers being thrown around re: healthcare costs and the proposed ObamaCare proposals that’s it’s easy to lose the forest in the trees.
Here’s what you need to know … in round numbers.
First, U.S. healthcare expenditures average a bit over $7,000 per capita.
There are roughly 47 million uninsureds – but that number includes, for example, illegal immigrants who Pres. Obama says won’t be covered. The proposed Senate bill covers 30 million uninsureds.
So, by simple arithmetic, the annual gross cost to cover the 30 million is about $210 billion – 30 million times $7,000.
Now, it starts to get tricky.
Reid proposes a $848 bullion increase in government healthcare spending over 10 years; Pelosi passed a bill north of $1 trillion across 10 years. (See chart below)
But, both bills delay the start of benefits for 4 years, so there are only 6 years of benefits in the 10 year projections.
The implication: Reid’s bill costs about $140 billion per year once it’s up & running; Pelosi’s bill costs about $165 billion. For simplicity, we’ll strike an average and round down to $150 billion.
Now, $150 billion is less than the $210 billion it costs to cover 30 million uninsureds ar $7,000 a pop. How can that be?
Well, some of the newly covered uninsureds will be paying their own way — in total or in part. For example, some healthy young folks who can afford health insurance but make an economically rational choice to self-insure. They’ll be “mandated” to buy insurance – and fined or jailed if they don’t. Other folks will get taxpayer subsidized insurance but – based on means tests – will have to pay part of the premiums.
My take: the spending estimates are probably reflective of what the bills say – the projections “haircut” the costs of the 30 million uninsureds and add in the costs of building and running the forthcoming government bureaucracy (think electronic medical records and thousands of watchdogs and claims processors pirated from the DMV and IRS).
That’s the spending. How will it be paid for?
In round numbers, they’re talking about $1 Trillion of new spending … financed about 1/2 from heathcare cuts (mostly MediCare) – and about 1/2 from higher taxes.
Taxes are projected to go up about $50 to $75 billion per year. Healthcare cuts are estimated to be about $50 billion per year. (Keep in mind that the tax increases and healthcare cuts start immediately, benefits are delayed until year 5).
So, over the first 10 years, the early-starting cuts and taxes balance out against the late-starting benefits to the uninsureds … and even provide some excess taxes to pay down the deficit. (yeah, right !)
But, what happens each year, starting in year 5 when the benefits begin?
Well, based on the above calculations, the are $150 billion per year in increased spending, but only $100 billion per year in compensating healthcare cuts and tax increases.
Oops.
Looks like another $50 billion in healthcare cuts (i.e. rationing) and tax increases are coming down the pike.
That, my friends is all you need to know.
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Here’s a simple “sources & uses” statement. All numbers in billions. Read ‘em and weep …
Click to enlarge
http://www.taxfoundation.org/blog/show/25527.html
The Homa Files 