Monday, June 15, 2009

A model of efficiency

"WASHINGTON – Sen. Edward M. Kennedy's health overhaul bill would cost at least $1 trillion over 10 years but only insure about 16 million." -AP article quoting the Congressional Budget Office

Leaving aside the "at least" language, and the fact that government estimates are usually unrealistically optimistic, we'll give Mr. Kennedy the benefit of the doubt as we do the math:

$1,000,000,000,000/16,000,000 people = $62,500/person
$62,500/10 years = $6,250/person/year

To test my suspicions, I requested some private health insurance quotes for my family. Prices varied, but a reasonably good, middle of the road plan goes for $270 per month, for all three of us. Let's do some more math.

$270/3 people = $90/person/month
$90 x 12 months = $1,080/person/year

That means the government could buy insurance on the retail market for my family, and nearly six similar families for what the government would spend on us under Senator Kennedy's proposal. Stated another way, it could do it for 17% of the cost of Senator Kennedy's proposal. In other words, 83% cheaper. Or, in yet other words, at a savings of $827,000,000,000. Or at a savings exceeding the cost of the TARP.

Of course, this is likely a best case scenario. It unrealistically assumes the program will come in on budget. It ignores the likely unintended consequences of employers who currently provide insurance ceasing to do so. It does not, and cannot, account for the opportunity costs of how that trillion dollars could otherwise be used.

If current health care benefits are taxed to pay for it, it leaves out the resulting impact on the currently insured, their employers, and their ability to hire new workers. It also ignores the inflation and interest charges that will come if (or more likely when) the bill for this is monetized by the government.

Considering 16 million people equates to approximately 5% of the US population, you'd have to multiply Senator Kennedy's $1 Trillion by 20 to insure all Americans. That's $20 Trillion dollars, my friends.

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