Thursday, August 6, 2009

Did CBO Underestimate The Cost Of Health Care Reform By A $Trillion?

Stephen Parente, a principal of the consulting firm Health Systems Innovations as well as the director of the Medical Industry Leadership Institute and an associate professor in the finance department at the Carlson School of Management at the University of Minnesota, believes that the Congressional Budget Office has underestimated the cost of the Democrat's plan to fix health care.

Parente says in an article, "Another Trillion?" published in the Summer 2009 issue of CITY Journal, a quarterly magazine of urban affairs, published by the Manhattan Institute, and edited by Brian C. Anderson:

The CBO is actually being kind to the would-be reformers. Its analysis likely understates—by at least $1 trillion—the true costs of expanding health coverage as current Democratic legislation contemplates. Over the last few months, my colleagues and I at the consulting firm Health Systems Innovations have provided cost estimates of health-care reform to both Republican and Democratic members of Congress, and we’ve posted these estimates on our website as well. We believe that the Democratic bills currently under consideration in the House and Senate would cost $2.1 trillion and $2.4 trillion, respectively—much higher than CBO’s figures.
Read the entire article here.

The difference in the cost estimates is due to different projections of the number of people who will use the public option. Parente and HSI use newer, non-public industry data to estimate public option usage. Parente used 2006 year data and CBO used public data from the year 2000 without seeking to of purchase the private industry data for the 2006 year for its analysis.

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