[Corrected 12/2-- The CBO report isn't as grim as my emailer, or I, originally thought. The changes below reflect this. ] An alert reader (who is involved in the health care debate and, like me, favors Obama's reform) emails:
Most of the coverage I’m seeing today of the new CBO report on health reform’s effects on premiums is .totally in the tank for the Obama administration. CBO’s report argues (contrary to a recent paper by Jonathan Gruber, the Obama administration’s favorite health economist) that health reform will INCREASE the cost of private health premiums. There’s no other way to read the thing. Yet the NYT ["No Big Cost Rise in U.S. Premiums Is Seen in Study"] and Wash Post ["Senate health bill gets a boost"] and especially Ezra Klein ["Congressional Budget Office: Reform Will Bring Down the Cost of Health Insurance" ] are all saying the report vindicates the Democrats on cost. That’s insane. (The WSJ’s ["Some Health Premiums to Rise"] is the only news account I’ve seen that reports it straight.).
How are reporters distorting this? Mainly in two ways.
1) They’re emphasizing that health reform will leave employer-based premiums largely unaffected. This is supposed to be a huge accomplishment. But health reform does virtually nothing to alter employer-based health care—it’s focused on the individual "nongroup" market—so to say it will have virtually no impact on employer-based premiums is like saying it will have virtually no effect on global warming.
[2) They’re] emphasizing that health reform will lower premiums for the majority of participants in the nongroup market by up to 60 percent. It will do nothing of the sort. It will INCREASE premiums in this market by 10 to 13 percent. That it will do so for good reasons (regulatory changes will require insurers to provide more actual insurance to customers) may justify the increase, but it doesn’t contradict it. Premiums will be higher because of health reform. The bill alleviates this for more than half of all participants in the new exchanges by extending income-based subsidies that will reduce the out-of-pocket cost of premiums by up to 60 percent as compared to what purchasers would pay without health reform. But that shouldn’t be mistaken for lowering the actual cost, which will still be borne by the nearly half of all purchasers who don’t receive subsidies. [E.A.]
When Ivy League universities raise tuition but pledge increased subsidies (i.e. financial aid) the headline usually reads something like "Yale Raises Tuition." ...
P.S.: [ Corrections below ] Klein seems particularly disingenuous , discussing the report as if premiums would rise only because newly empowered individuals would choose to buy better policies:
Premiums for the same policy in the individual market fall by 14 to 20 percent. But people in the individual market, who are largely low-income, will now have the opportunity to purchase better policies that cover more expenses and provide more security. That's a good thing. It's one of the reasons for health-care reform, in fact. And it is not analogous to health-care insurance becoming more expensive, any more than the fact that I could buy a nicer car after getting a better job suggests that cars are becoming more expensive. [E.A.]
But individuals--at least those buying new policies-- won't
be able to buy "the same
policy" that they can now, as I understand it. The policies they buy on the new exchanges will have to include some state-mandated benefits ("mental health and substance abuse treatment") and they could not exclude preexisting conditions. Both changes make policies better, but also more expensive.
If you are an individual without a preexisting condition who doesn't want to buy mental health or drug abuse insurance--sorry!
Your premiums are going up anyway
--and by more than the CBO's average 10 -13%, presumably, because that figure averages in all the people who now pay more
because of their preexisting conditions
. You'll have to pay for them anyway. Will that increase outweigh the premium-reducing effect of a) the efficiencies introduced by the bill's "exchanges," and b) the broader insurance pool created because young, healthy people are now required to sign up? It's not clear to me. It looks as if CBO estimates the cost increases due to mandated benefits as at least 9%, probably a bit more,** while the cost-reducing factors are 14-20%.But for an individual without a preexisting condition the cost increase would presumably be higher than 9%, since that averages in all the people who now pay more
because of their preexisting conditions.
Plus, according to CBO, that apparently doesn't account for another factor that could push up prices--
more people using more services because they'd have policies that require less cost-sharing
.expanded insurance driving up health care spending overall, and encouraging the "accelerated dissemination of new medical procedures" (as happened when Medicare started, apparently).
These would be relatively small prices worth paying for the security of knowing that you can always get reasonably priced insurance. But it's silly to pretend that either premiums in the key individual market will never go up a bit (before being subsidized back down for some) or that if they do go up it will just be because people voluntarily buy the equivalent of "a nicer car."
The fear, of course, is that if the first thing already-insured, healthy individual voters see as a result of health care reform is a non-trivial hike in their premiums, they might not be very happy about the Democrats' achievement. Their unhappiness will be all the greater if they've been promised a premium cut , or if any increase is glibly dismissed as simply paying for benefits that they've now had the "opportunity" to purchase. ... The fate of the 1988 catastrophic health care insurance bill-- passed, then repealed --offers a relevant, cautionary example, no? ...
Update: Clive Crook defends the MSM . He also addresses the "more important" question of whether the CBO report is right , worrying that premiums will rise due to a factor CBO pooh-poohs--adverse selection. ...
**-- The 9% doesn't include involuntary increases when individuals who have policies that cover less than 60% of their projected costs are forced to buy policies that cover that statutory amount. Apparently there aren't many such people, but there are some. ... 4:17 P.M.