Preliminary Cost Estimate for Pending Health Care Legislation

March 18, 2010

The Congress is considering the pending health care legislation in two components: One is a bill (H.R. 3590) that the Senate passed in December; the other is a reconciliation bill that would modify the Senate-passed bill in a number of ways. (In general, a reconciliation bill seeks to implement instructions in the Congressional budget resolution in order to achieve the budgetary goals set forth in that resolution; special parliamentary procedures apply to the consideration of such bills.)

CBO and the staff of the Joint Committee on Taxation (JCT) have just completed a preliminary estimate of the direct spending and revenue effects of the reconciliation proposal that was made public on March 18, 2010. (Direct spending is spending that would result from enactment of this proposal without any further legislation. The estimate does not encompass discretionary spending, which would be subject to future action in appropriation bills.)

The estimate is presented in three ways:

  • An estimate of the budgetary effects of the reconciliation proposal, in combination with the effects of H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate. The combination of those two pieces of legislation would reduce federal deficits by an estimated $138 billion over the 2010-2019 period.
  • An estimate of the incremental effects of the reconciliation proposal, over and above the effects of enacting H.R. 3590 by itself. CBO and JCT estimate that enacting the reconciliation proposal would add about $20 billion to the deficit reductions over the 2010-2019 period, on top of the $118 billion in net savings attributable to the Senate-passed H.R. 3590.
  • An estimate of the budgetary impact of the reconciliation proposal under the assumption that H.R. 3590 is not enacted (that is, an estimate of the bills impact relative to current law as of today). Although estimates on that basis have been completed for most of the provisions of the reconciliation proposal, CBO does not yet have such an estimate for all of the provisions. By CBOs estimate, the provisions that have been analyzed so far would reduce deficits by $82 billion over the 2010-2019 period.

Although CBO completed a preliminary review of legislative language prior to its release, the agency has not thoroughly examined the reconciliation proposal to verify its consistency with the previous draft. This estimate is therefore preliminary, pending a review of the language of the reconciliation proposal, as well as further review and refinement of the budgetary projections.

The reconciliation proposal includes provisions related to health care and revenues, many of which would amend H.R. 3590; those provisions account for most of the budgetary impact of the proposal. It also includes amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education; the education provisions account for net outlay savings of about $19 billion over the 2010-2019 period.

Although CBO does not generally provide cost estimates beyond the 10-year budget projection period, certain Congressional rules require some information about the budgetary impact of legislation in subsequent decades, and many Members have requested CBOs analyses of the long-term budgetary impact of broad changes in the nations health care and health insurance systems. Therefore, CBO has developed a rough outlook for the decade following the 2010-2019 period. We estimate that the combined effect of enacting H.R. 3590 and the reconciliation proposal would be to reduce federal budget deficits over the ensuing decade relative to those projected under current lawwith a total effect during that decade that is in a broad range around one-half percent of gross domestic product (GDP).