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Q&A: HEALTHCARE

Explaining the $900-billion healthcare price tag

President Obama told Congress that his healthcare overhaul would cost $900 billion over 10 years. Where does that figure come from?

September 14, 2009|Noam N. Levey

WASHINGTON — In his speech to a joint session of Congress, President Obama said his healthcare overhaul would cost "around $900 billion over 10 years" -- a hefty price tag but substantially less than the projected cost of some of the proposals lawmakers are considering. Here is a look at what that number means:

Where does the figure come from?

Although the White House has not drawn a connection, Senate Finance Committee Chairman Max Baucus (D-Mont.), who has been working on a bill designed to attract moderates in both parties, has indicated his legislation should cost about $900 billion. The president and his congressional allies have been under pressure to keep the cost of the overhaul under $1 trillion over the next decade. The total cost is particularly important to fiscally conservative Democrats, who will be key to passing a healthcare bill, particularly in the Senate.

Does that mean that the federal deficit will grow by $900 billion?

Not necessarily. In his Wednesday speech, Obama repeated his pledge not to sign a bill "that adds one dime to our deficits." Congressional Democrats have been working for months to come up with a combination of new revenue and cuts in other federal healthcare spending so the bill will be "deficit neutral."

Does the president's plan contain $900 billion in savings and new revenue?

We don't know. Obama has not yet submitted a plan; he's set goals but so far has left the specifics to Congress. There are several different bills in Congress, each the work of a specific House or Senate committee, and the process of melding them is just beginning.

Since February, when Obama unveiled his budget, the White House has offered a series of proposals to help finance a healthcare overhaul. The president initially proposed reducing tax deductions for families making more than $250,000, which the White House estimated could raise about $318 billion over the next decade.

He also has proposed more than $600 billion in cuts and changes to the government's Medicare and Medicaid insurance programs, designed to both save money and make the programs for the elderly and the poor more efficient.

On Wednesday, Obama seemed to endorse some new taxes on insurers that provide very expensive healthcare benefits, a proposal that could generate as much as $200 billion.

What have Democratic lawmakers come up with so far?

Only the House has advanced a comprehensive healthcare overhaul bill, and it is expensive. That legislation, which is awaiting a vote on the floor, contains more than $1.5 trillion of new healthcare spending over the next decade. Most of that is offset by cuts in what the federal government pays insurance companies, hospitals and others through Medicare and a surtax on single taxpayers making more than $280,000 a year and families making more than $350,000. According to the nonpartisan Congressional Budget Office, the bill would expand the federal deficit by $239 billion over the next decade. Efforts to close that gap are still under way.

What about in the Senate?

The Senate health committee has approved a bill that would expand insurance coverage at a cost of more than $600 billion over the next decade. (Most of the cost of all the healthcare plans is connected with extending coverage to the uninsured.) Because the committee does not have jurisdiction over taxation or over Medicare, its bill does not spell out how the expanded coverage would be paid for. So all eyes will be on Baucus' finance committee.

Baucus is not expected to propose any new income taxes to pay for healthcare, which he and other centrist Democrats rejected when Obama proposed them earlier this year. But his bill is expected to include a series of cuts in Medicare and new taxes or fees on insurance companies that offer so-called Cadillac health plans.

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noam.levey@latimes.com

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