No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

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How Do You Hide $475 Billion

by @ 5:18 on October 20, 2009. Filed under Health Care Reform, Politics - National.

As amusing as the answer might be, the correct answer is not, “With a REALLY large mattress!”

A couple of weeks back, the Senate Finance committee passed the Baucus bill version of Placebocare.  Much heralded at the time, was the announcement that the Baucus bill had managed to meet President Obama’s promise that socialized health care would cost less than $1 Trillion for the first 10 years.  In fact, the Baucus bill purported to leave lots of wiggle room for CBO fine tuning, with a price tag of merely $829 Billion dollars.

Philip Klein at the American Spectatortook a look at the Baucus costs and found something interesting; the 10 years of costs really only included 4 years of the Baucus program being full implemented.  In the words of Desi Arnaz, “Oh Lucy, you forgot something!”

The graphical presentation from Klein clearly shows the problem in the cost analysis:

Baucusbill

You can see that while there are some costs in the early years, the Baucus bill costs don’t hit their trend line until 2016. The graph shows clearly that 2010 through 2015 do not reflect the same program as that from 2016 on.

OK, we have a gap. The logical next question is, “If $829 billion isn’t the true 10 year cost, what is?”

I began with the information provided by Klein and look at the per person costs of the Baucus plan based on the projected estimation of the US population.  This review shows that the Baucus bill assumes that after adjusting for population, they have baked in an average of a 7% inflation rate from 2016 on.  I used this same 7% inflation rate and worked backwards from 2016 and further adjusted for the projected inflation.  I then did a calculation of what the Baucus bill might cost, with these assumptions, if it was fully implemented from day 1 in 2010.  The calculations are in the following spreadsheet:

Baucus cost

Column “B” is in 1,000’s, “D” and “E” are $.  The others are in billions.

Assuming a 7% inflation rate and increasing population growth, my calculation shows that if the Baucus bill were fully implemented on day 1 rather than 6 years later, the total cost for the 10 years would be well over President Obama’s commitment of $1 trillion dollars.  In fact, the cost would likely be $475 billion, 57% more than what was trumpeted by the Finance committee.  Rather than $829 billion dollars, the true 10 year cost would be over $1.3 trillion dollars!

Q: How do you hide $475 billion dollars? 

A: Claim to pay for the program for only 40% of the time!

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