Tag: health plan

The Senate Bill Would Increase Health Spending

Ezra Klein quotes the Congressional Budget Office’s latest cost estimate of the Senate health care bill when he writes:

“CBO expects that the legislation would generate a reduction in the federal budgetary commitment to health care during the decade following 2019,” which is to say that this bill will cover 30 million people but the cost controls will, within a decade or so, leave us spending less on health care than if we’d done nothing.  That’s a pretty good deal. But it’s not a very well-understood deal.

Indeed, because that’s not what the CBO said.

First, the CBO said the “federal budgetary commitment to health care” would rise by $210 billion between 2010 and 2019 under the Senate bill.  Then, after 2019, it would fall from that higher level.  And it could fall quite a bit before returning to its current level.

Second, the “federal budgetary commitment to health care” is a concept that includes federal spending on health care and the tax revenue that the federal government forgoes due to health-care-related tax breaks, the largest being the exclusion for employer-sponsored insurance premiums.  If Congress creates a new $1 trillion health care entitlement and finances it with deficit spending or an income-tax hike, the “federal budgetary commitment to health care” rises by $1 trillion.  But if Congress funds it by eliminating $1 trillion of health-care-related tax breaks, the “federal budgetary commitment to health care” would be unchanged, even though Congress just increased government spending by $1 trillion.  That’s what the Senate bill’s tax on high-cost health plans does: by revoking part of the tax break for employer-sponsored insurance, it makes the projected growth in the “federal budgetary commitment to health care” appear smaller than the actual growth of government.

Third, the usual caveats about the Senate bill’s Medicare cuts, which the CBO says are questionable and Medicare’s chief actuary calls “doubtful” and “unrealistic,” apply.  If those spending cuts don’t materialize, the “federal budgetary commitment to health care” will be higher than the CBO projects.

Fourth, Medicare’s chief actuary also contradicts Klein’s claim that the Senate bill would “leave us spending less on health care than if we’d done nothing.”  The actuary estimated that national health expenditures would rise by $234 billion under the Senate bill.

And really, Klein’s claim is a little silly.  Even President Obama admits, “You can’t structure a bill where suddenly 30 million people have coverage and it costs nothing.”

What Is ‘Meaningful’ Health Insurance? Who Decides?’

Noting that premium increases, such as Anthem’s proposed 39-percent hike in California, have caused individuals and employers to purchase less coverage, Kaiser Family Foundation president Drew Altman writes:

Rising health care costs and insurance company practices are leading not just to more expensive premiums, but to skimpier, less comprehensive coverage as well; slowly redefining what we have known as health insurance. To be sure, some economists argue that this is precisely what should happen…But this is not likely how regular people see it. Appropriate cost sharing is one thing, but we may be reaching the point in the individual market where the policies many people have simply cannot be considered meaningful coverage.

Of course, this is the whole idea behind President Obama’s proposed tax on high-cost health plans: higher prices will cause people to purchase less coverage, which will temper health care spending.

But whether Altman is correct depends on what the meaning of “meaningful” is.  When individuals pare back the amount of insurance they purchase, they are revealing what they consider to be meaningful coverage.  (The same is true when employers opt for less-comprehensive coverage, though employers’ revealed preferences are obviously a poor proxy for what their workers value.)

If Altman thinks the coverage that individuals are choosing “cannot be considered meaningful coverage” (note the passive voice), he is implicitly stating that individuals are not the best judges of their own welfare.  And the only way to devise an alternative definition of meaningful coverage is through the political process.

It is difficult to argue that the political process does a better job of selecting meaningful coverage.  That process forces many consumers to purchase coverage that they don’t find meaningful (e.g., chiropractic, acupuncture, circumcision), that they find offensive (e.g., abortion, contraception, in-vitro fertilization), or for treatments that are downright harmful (e.g., high-dose chemotherapy combined with autologous bone-marrow transplant for late-stage breast cancer).

Letting consumers reveal their preferences is possibly the worst way to define “meaningful coverage.”  Except for all the others.

Questions for Thoughtful ObamaCare Supporters

What does it say that the American polity has consistently rejected a wholesale government takeover of health care for 100 years?

What does it say that public opinion has been consistently against the Democrats’ health care takeover since July 2009?

What does it say that Democrats are having this much difficulty enacting their health care legislation despite unified Democratic rule?  Despite large supermajorities in both chambers of Congress, including a once-filibuster-proof Senate majority (see more below)?  Despite an opportunistic change in Massachusetts law that provided that crucial 60th vote at a crucial moment?  Despite a popular and charismatic president?

What does it say that 38 House Democrats voted against the president’s health plan?

What does it say that Massachusetts voters elected, to fill the term of Ted Kennedy, a Republican who ran against the health care legislation that Kennedy helped to shape?

What does it say that the only thing bipartisan about that legislation is the opposition to it?

What does it say that 39 senators voted to declare that legislation’s centerpiece unconstitutional?

What does it say that health care researchers – a fairly left-wing lot – think the Senate bill is unconstitutional?

What does it say that the demands of pro-life and pro-choice House Democrats, each of which hold enough votes to determine the fate of this legislation, are irreconcilable?

What does it say that House Democrats are actually contemplating a legislative strategy that would deem the Senate bill to have passed the House – without the House ever actually voting on it?

Given that ours is a system of government where ambition is made to counteract ambition, what does it mean that the only way to pass this legislation is for the House to trust that the Senate will keep the House’s interests at heart?

Obama’s HSA Gambit a Net Minus?

President Obama evidently thinks that if he promises not to kill health savings accounts (HSAs), opponents will swoon for his government takeover of health care.  If that doesn’t do the trick, he should make clear that his health plan would not eliminate other things too, like the Defense Department and puppies.

Of course, that hollow gesture didn’t win the president any Republican support.  But it may have cost him some Democratic support – or at least frayed the nerves of a few House Democrats.  According to CongressDaily:

Liberals, meanwhile, are fuming over an addition Obama made to his proposal to make the effort appear bipartisan and possibly switch the votes of moderate Democrats who opposed the House bill last year.

The Congressional Progressive Caucus co-chairman, Rep. Raul Grijalva, D-Ariz., said Wednesday he is disturbed and bitter about an addition he said goes against Democratic principles.

“I’ve been leaning ‘no’ for a long time. That hasn’t changed,” Grijalva said about voting for the healthcare overhaul the Senate passed in December and a package of changes that would move through a separate bill through reconciliation.

Obama indicated he might be open to a provision that would encourage the use of health savings accounts, a tax-exempt savings account that typically is used in conjunction with a high-deductible plan. The provision would allow the exchanges to offer high-deductible plans.

“For some of us, the bitterness about HSAs in and the public option completely out, I don’t know how long that’s going to linger,” Grijalva said.

Which tends to confirm what HSA supporters have long feared: killing HSAs is the Left’s game plan.

Obama’s ‘Best’ Idea? Rationing Care via Clinton-esque Price Controls

Hoping to revive his increasingly unpopular health care overhaul, President Obama has invited Republicans to a bipartisan summit this Thursday and plans to introduce a new reform blueprint in advance of the summit.  On Sunday, the White House announced that a key feature of that blueprint will be premium caps, a form of government price control that helped kill the Clinton health plan when even New Democrats rejected it.

The New York Times reports on President Obama’s blueprint:

The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators.

It bears repeating what Obama’s top economic advisor Larry Summers thinks about price controls:

Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.

For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: “Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly — i.e., to deny coverage for more services.”  No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called “public option.”

As the Progressive Policy Institute’s David Kendall explained in a 1994 paper, the Clinton health plan contained similar price controls.  Kendall explains why they would be a disaster:

In spite of the late hour in the health care debate, Congress has not yet decided how to restrain runaway health care costs. The essential choices are a top- down strategy of government limits on health care spending enforced by price controls or a bottom-up strategy of consumer choice and market competition. History clarifies that choice: Previous government efforts to regulate prices in peacetime have invariably failed. Moreover, government attempts to control prices in the health care sector would undermine concurrent efforts to restructure the marketplace…

The idea of controlling costs by government fiat is seductively simple. But it rests on a conceit as persistent as it is damaging: that government bureaucracies can allocate resources more wisely and efficiently than millions of consumers and providers pursuing their interests in the marketplace. The alternative – one rooted in America’s progressive tradition of individual responsibility and free enterprise – is to improve the market’s ground rules in order to decentralize decision-making, spur innovation, reward efficiency, and respect personal choice.

As centrally planned economies crumble around the world, many in the United States seem bent on erecting a command and control economy in health care. This policy briefing examines the reasons why government price regulation would fail to constrain health care costs and create many adverse side effects…

Ultimately, government price regulation will always fail because it does not change the underlying economic forces driving up prices. If we are serious about slowing the growth of health care costs, we have to change the ways we consume and provide medical care. Price controls evade the hard but essential work of structural reform in health care markets: They are a quintessentially political response to an economic problem. The alternative is to allow well-functioning markets to set prices and allocate resources, while ensuring that all Americans have access to affordable health care coverage. The market-oriented approach leaves decisions to cost-conscious consumers and health care providers rather than bureaucrats.

Any of that sound familiar?  It’s worth reading the whole thing.

This is not hope.  This is not change.  (Much less a game-changer.)  It is, to pinch a phrase, a return to “the failed theories that helped lead us into this crisis.”

Trouble in Massachusetts

Yesterday, Cato released a new study, “The Massachusetts Health Plan: Much Pain, Little Gain,” which showed that official estimates overstate the gains in health insurance coverage resulting from a 2006 Massachusetts law by at least 45 percent.  The study also finds: supporters understate the law’s cost by nearly 60 percent; government programs are crowding out private insurance; self-reported health improved for some but fell for others; and young adults are responding to the law by avoiding Massachusetts.

Given that the Massachusetts health plan bears a “remarkable resemblance” to the Obama plan, the study should serve as a warning sign to members of Congress, says Michael Cannon, director of health policy studies.

The study has received coverage in Investor’s Business Daily, The Wall Street Journal, The Washington Post, Detroit News, The Washington Times, the Reason Foundation and the Pioneer Institute.

Obama’s Other Massachusetts Problem

Even if Democrat Martha Coakley wins 50 percent of the vote in the race to fill the late Sen. Ted Kennedy’s (ahem) term, there are other numbers emanating from Massachusetts that present a problem for President Obama’s health plan.

On Wednesday, the Cato Institute will release “The Massachusetts Health Plan: Much Pain, Little Gain,” authored by Cato adjunct scholar Aaron Yelowitz and yours truly. Our study evaluates Massachusetts’ 2006 health law, which bears a “remarkable resemblance” to the president’s plan. We use the same methodology as previous work by the Urban Institute, but ours is the first study to evaluate the effects of the Massachusetts law using Current Population Survey data for 2008 (i.e., from the 2009 March supplement).  Since I’m sure that supporters of the Massachusetts law and the Obama plan will dismiss anything from Cato as ideologically motivated hackery: Yelowitz’s empirical work is frequently cited by the Congressional Budget Office, and includes one article co-authored with MIT health economist (and Obama administration consultant) Jonathan Gruber, under whom Yelowitz studied.

Among our findings:

  • Official estimates overstate the coverage gains under the Massachusetts law by roughly 50 percent.
  • The actual coverage gains may be lower still, because uninsured Massachusetts residents appear to be concealing their lack of insurance rather than admit to breaking the law.
  • Public programs crowded out private insurance among low-income children and adults.
  • Self-reported health improved for some, but fell for others.
  • Young adults appear to be avoiding Massachusetts as a result of the law.
  • Leading estimates understate the cost of the Massachusetts law by at least one third.

When Obama campaigns for Martha Coakley, he is really campaigning for his health plan, which means he is really campaigning for the Massachusetts health plan.

He and Coakley should explain why they’re pursuing a health plan that’s not only increasingly unpopular, but also appears to have a rather high cost-benefit ratio.

(Cross-posted at Politico’s Health Care Arena.)