If the Affordable Health Choices Act, proposed by Sen. Ted Kennedy (D-Mass) and Senate Democrats last week, were enacted in its current form, it would cost $1 trillion over the next decade, according to the Congressional Budget Office.

Edward M. Kennedy

In a June 15 letter to Kennedy, Douglas W. Elmendorf, the CBO’s director, says his office’s preliminary analysis of the legislation reached that cost estimate, but does not represent “a formal or complete cost estimate,” as many of the features of the legislation remain incomplete.

If the proposal is enacted, the CBO estimated, about 39 million individuals would obtain coverage through the new insurance exchanges. The number of people with employer-based coverage would also decline by about 15 million, or roughly 10%, and coverage from other sources would fall by about 8 million. The CBO derives that the net decrease in the number of people uninsured would be about 16 million.

The legislation, introduced June 9, seeks to make health care coverage more affordable for those without it and permit Americans to choose between their existing coverage or other options. One of the most controversial options being discussed on Capitol Hill is a public, government-run insurance program, which the bill does not address, as Democrats hope to work with Republicans on a compromise.

Elmendorf did note in the letter that the draft legislation would establish insurance exchanges – or “gateways” – through which individuals and families can purchase coverage and would also provide federal subsidies to reduce the cost of that coverage for some enrollees.

The CBO noted that because expanded eligibility for the Medicaid program could be added at a later date, those figures “are not likely to represent the impact that more comprehensive proposals – which might include significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150% of the federal poverty level – would have both on the federal budget on the extent of insurance coverage.”

Regarding insurance coverage, the CBO noted that the Affordable Health Choices Act seeks an increase in the number of legal U.S. residents who have health insurance.

Through the bill, the government would provide grants to states for insurance exchanges and also subsidize the purchase of insurance through those exchanges for those with incomes between 150% and 500% of the federal poverty level.

“Those subsidies would represent the greatest single component of the proposal’s cost,” Elmendorf wrote. “The proposal would also impose a financial cost on most people who do not obtain insurance, the size of which would be set by the secretary of the Treasury.”

Items not reflected in the CBO’s initial estimate, he added, as they have not been finalized include requiring insurers to offer dependent coverage for children of policyholders who are less than 27 years old and allowing employers to buy health coverage through the exchanges.

Mark-ups of the bill are expected to begin June 17 when Kennedy’s Senate Committee on Health, Education, Labor and Pensions meets in executive session.