CBO Views GOP Health Plan Costs

4 September 1994

A key feature of the health care reform offered by US Republican leaders could unintentionally raise the cost of standard insurance plans and threaten their existence, the Congressional Budget Office has warned in a report on the plan, which has been put forward by House Republican leader Robert Michel and Senator Trent Lott. The bill is being touted as a new basis for action, now that House Speaker Thomas Foley has conceded that Congress is unlikely to pass a broad-based plan.

The plan would expand the availability of catastrophic health plans to cover medical expenses exceeding $1,800 a year per person or $3,600 for a family. To cover out-of-pocket expenses, it would permit tax-sheltered medical savings accounts. Such plans could attract relatively healthy people who expect few out-of-pocket expenses but still want cover in case they become severely ill, the CBO said, so those left in the standard plans would be older and sicker, driving premiums up.

The plan would also let the self-employed deduct all their insurance premiums, limit awards for medical malpractice, require employers to offer but not pay for insurance and restrict insurers' rights to deny cover to sick people. It would pay for the subsidies and tax benefits by raising the Medicare premium for the high-income elderly, making about one million legal aliens ineligible for social security and Medicaid and limiting social security benefits for abusers of drugs and alcohol.

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