Following the money in health care overhaul

John W. Schoen Senior producer • Profile • E-mail

If and when Congress gets around to passing a bill to overhaul the health care system, the price tag will be in the hundreds of billions of dollars. Where is all that money going to go?

I am really confused about the health care bill. The latest one passed by the finance committee does not have the public option, yet it will cost us $829 billion. What is the money being used for? Is it costing us $829 billion to insure 29 million people?
-Rodney, Louisville, Ky.

It’s not hard to be confused by the details of the current proposal to overhaul health care.

The confusion starts with “health care system” itself. It's a mind-bogglingly complex concoction of health care providers, insurance companies, drug makers, hospitals, employers, and government, among others. With the possible exception of the handful of members of Congress involved in creating a single health care bill, no one really has a clue which elements of the 12 separate proposals will become law. Until the plan is finished, it's equally unclear which corners of the system will gain or lose from the changes.

The most detailed overall cost estimates so far come from the Congressional Budget Office, which came up with the $829 billion gross price tag for what has become the starting point in the debate over the final bill. The Senate Finance Committee now has to take its bill and try to merge it with proposals from three House committees. Since Congress rarely makes a difficult choice without a major deadline approaching, our guess is the final horse-trading and arm-twisting will go right up to the Christmas recess.

Still, to the extent there is any agreement about health care reform, the Senate bill is a good place to start. The bill would set up health insurance “exchanges” where people who don’t have insurance at work or through the government could shop for coverage. The goal is to make it easier to shop for a health plan by standardizing what’s covered and what’s not.

Details about how these exchanges would be managed are still sketchy; they may be state-run under federal guidelines.

The biggest single cost of $461 billion through 2019, according to the CBO, would cover subsidies paid to help people buy coverage on the exchanges. The Senate bill provides a sliding scale for anyone earning less than four times the federal poverty level, or $73,240 for a family of three.

These exchanges would sell plans provided by private insurance companies, which have succeeded in keeping a government-run insurance company, the so-called "public option," out of the Senate bill so far. But the idea isn't dead. On Friday, Democratic Congressional leaders said they're still pressing to allow the government to compete with private insurers as a way of driving down costs. Critics say it will force private insurers out of the market and limit consumers' choices. Opposition in the Senate remains strong.

One compromise would involve setting aside government grants to set up non-profit "insurance cooperatives." Another would put the "public option" on hold, but include a "trigger" that would revive the idea if the rest of the plan falls short on expanding coverage.

The next biggest cost would be an expansion of Medicaid, the federal program administered by the states that covers low-income individuals and families. Under the Senate bill, eligibility would be raised to 133 percent of the poverty level. That would cost $345 billion, according to the CBO. Another $23 billion would provide a tax credit to help small businesses offer coverage to their employees. The plan also counts on a variety of savings, including cutting annual increases in Medicare payments to providers.

The plan also would be offset by $510 billion in spending cuts and a variety of "revenue raising measures," also know as taxes, to the tune of $296 billion. The way the CBO figures it, the whole thing would actually reduce the federal deficit by $12 billion over the next decade.

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