United Kingdoms National Health Service. In 1946, the British government estimated that the first-year cost of its proposed National Health
Service, which would provide free health care to all citizens at the point of service, would be £260 million. The actual expenditures of the NHS in its
first year of operation (1948- 49) were £359 million38% more than predicted.ii
Britains official assessment of what happened is typically understated: Architects of the NHS underestimated the immediate public demand and the consequent costs.iii A more vivid assessment, from the British Health Minister in May 1949 to his Cabinet colleagues:
If the present [budget] estimates are not to be exceeded, services must be withheld which the community has proved it urgently needsdental treatment and spectacles must be refused, beds must be closed, staff dismissed, and waiting lists already appallingly long must grow even longer. I do not think my colleagues will wish this to happen; I hope they will share my view that the additional money must be found to prevent its happening. But if they do not, I shall need their assistance in determining which services should be withheld and which developments cancelled.iv
Over the past 60 years, British debates about NHS under-funding have followed essentially this same pattern: Demand for free services is still exceeding available funds; therefore, the government must either increase funding or reduce patients access to care. This problem is not exclusive to Britain. Government health care programs in the U.S. have proven just as vulnerable to cost under-projections:
Medicare (hospital insurance). In 1965, as Congress considered legislation to establish a national Medicare program, the House Ways and Means Committee estimated that the hospital insurance portion of the program, Part A, would cost about $9 billion annually by 1990.v Actual Part A spending in 1990 was $67 billion.vi The actuary who provided the original cost estimates
acknowledged in 1994 that, even after conservatively discounting for the unexpectedly high inflation rates of the early 70s and other factors, the actual [Part A] experience was 165% higher than the estimate.vii Medicare (entire program). In 1967, the House Ways and Means Committee predicted that the new Medicare program, launched the previous year, would cost about $12 billion in 1990. viii Actual Medicare spending in 1990 was $110 billionoff by nearly a factor of 10.ix
ESRD program. In 1972, Congress enacted a universal entitlement to kidney dialysis for patients suffering from end stage renal disease. The program proved twice as expensive as the publicly predicted levels$229 million in 1974 instead of the predicted $100 million. The bills authors had seriously underestimated the demand for services, especially among the over-65
population.x
Medicaid DSH program. In 1987, Congress estimated that Medicaids disproportionate share hospital (DSH) paymentswhich states use to provide relief to hospitals that serve especially large numbers of Medicaid and uninsured patientswould cost less than $1 billion in 1992xi. The actual cost that year was a staggering $17 billion. Among other things, federal lawmakers
had failed to detect loopholes in the legislation that enabled states to draw significantly more money from the federal treasury than they would otherwise have been entitled to claim under the programs traditional 50-50 funding scheme.xii
Medicare home care benefit. When Congress debated changes to Medicares home care benefit in 1988, the projected 1993 cost of the benefit was $4 billion. The actual 1993 cost was more than twice that amount, $10 billion.xiii
Medicare catastrophic coverage benefit. In 1988, Congress added a catastrophic coverage benefit to Medicare, to take effect in 1990. In July 1989, the Congressional Budget Office (CBO) doubled its cost estimate for the program, for the four-year period 1990-1993, from $5.7 billion to $11.8 billion. CBO explained that it had received newer data showing it had significantly under-estimated prescription drug cost growth, and it warned Congress that even this revised estimate might be too low. This was a principal reason Congress repealed the program before it could take effect.xiv
SCHIP. In 1997, Congress established the State Childrens Health Insurance Program as a capped grant program to states, and appropriated $40 billion to be doled out to states over 10 years at a rate of roughly $5 billion per year, once implemented. In each year, some states exceeded their allotments, requiring shifts of funds from other states that had not done so. By 2006, unspent reserves from prior years were nearly exhausted. To avert mass disenrollments, Congress decided to appropriate an additional $283 million in FY 2006 and an additional $650 million in FY 2007.xv
3 Massachusetts Commonwealth Care. In 2006, the Bay State passed a historic universal-coverage plan, which combined a mandate on all residents to have health coverage with generous subsidies for lower-income uninsured families.
At that time, the program was predicted to cost roughly $472
million in fiscal year 2008. It cost $628 million that year.xvi In the words of one Democratic state senator, who came to regret his vote for the plan:
The assumption was that, as more peopleand, in particular, more young and relatively healthy peoplejoined the system, premiums would go down across the board. There was also the assumption that as more people became insured, the number of people going to the emergency room would drop dramatically, saving the Commonwealth money. Neither of those things happenedat least not enough to produce the cost savings we were told we would see. In fact, health care reform has cost the Commonwealth much more than expected.xvii
We got collectively rick-rolled by bin Laden. And al Qaeda isn't even in Afghanistan anymore!
