That Cost Curve, Unbended

On December 4, the editorial board of the New York Times claimed in part

The health insurance industry frightened Americans—and gave Republicans a shrill talking point—when it declared in October that proposed reform legislation would drive up insurance costs for virtually everyone by as much as thousands of dollars a year. The nonpartisan Congressional Budget Office persuasively contradicted that claim this week.

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In its long-awaited study, the C.B.O. estimates that most Americans would pay the same or less in premiums in 2016, after reforms have kicked in, than they would pay under current law. Those who work for large employers (more than 50 workers) would, on average, see their premiums hold steady or drop by up to 3 percent per person covered. Those who work for small employers would also not see much change—anywhere from a 1 percent increase to a 2 percent reduction.

The Daily Howler's Bob Somberby critically asks

What is the “good news” in this editorial? According to the hapless editors, the “good news” is this:

Most Americans will pay the same or less in premiums in 2016, after reforms have kicked in, than they would pay under current law! And just for the record, you can pretty much ignore the word “less.” To the extent that some people will pay “less” after reform than they would pay under current law, they will pay “up to 3 percent” less! Essentially, nothing will change.

According to the editors, most Americans will pay as much after reform as they would pay under current law! And the editors describe this as “good news.” But as everyone knows, the whole world has been complaining about the way premiums will “sky-rocket” or “soar” under current law, if reform doesn’t pass. But now, we’re told that premiums will rise at that same rate—and it’s described as “good news!”

Somerby's cynicism is well-placed. There is little doubt, at least according to the Congressional Budget Office, that premiums in a public plan with rates which match those of Medicare for hospitals and exceed them by 5% for doctors would be cheaper than private non-group premiums. Alas, neither the House bill as approved, nor the Senate’s Patient Protection and Affordable Care Act, would include this "robust public option."

In his blog summarizing his agency’s report issued on November 30, CBO Director Douglas Elmendorf described the impact of the Senate’s blended health care bill premiums, as well as the likely impact on the deficit. Of the 59 percent of Americans who receive health insurance through their employers, he reported
In the small group market, which is defined in this analysis as consisting of employers with 50 or fewer workers, CBO and JCT estimate that the change in the average premium per person resulting from the legislation could range from an increase of 1 percent to a reduction of 2 percent in 2016 (relative to current law). In the large group market, which is defined here as consisting of employers with more than 50 workers, the legislation would yield an average premium per person that is zero to 3 percent lower in 2016 (relative to current law).

That would be a very slight reduction in premiums relative to that which would be expected under current law. But for those in the non-group market (admittedly a smaller group)

The average, unsubsidized premium per person covered (including dependents) for new non-group policies would be about 10 percent to 13 percent higher in 2016 than the average premium for non-group coverage in that same year under current law.

More than half of the enrollees in non-group policies would get federal subsidies, and taking those subsidies into account, the amount that subsidized enrollees would pay for non-group coverage would be roughly 56 percent to 59 percent lower, on average, than the non-group premiums charged under current law.

The cost of the policies would increase and without subsidies (which most of them would receive) there would be a 10%-13% increase for this group.

One does not have to be a “fiscal conservative” (a term continually misunderstood by the mainstream media, anyway) to recognize that these premiums paid directly by an individual would drop only as a result of the money kicked in by the American taxpayer- and that hardly is “bending the cost curve.” Compare, therefore, the impact of “reform” with the statement of Senator Obama during his third debate with Senator McCain:

The only thing we're going to try to do is lower costs so that those cost savings are passed onto you. And we estimate we can cut the average family's premium by about $2,500 per year.

Senator Obama promised a cut in the average family’s premiums and as described by the CBO, the “average” family’s premiums will decline, due to taxpayer subsidies. But candidate Obama reasoned that the drop would result from an effort to “lower costs so that those cost savings are passed onto you.” But the costs have not been lowered overall; thus, no cost savings are being passed onto the consumer. A real public option almost certainly would have had that effect, but the Administration hasn’t been interested in a strong government plan for months.

A few years ago- when the numbers were more favorable- the U.S. was spending 16% if its gross domestic product on health care while France was spending 11% and the United Kingdom 8.4%, Per capita spending on health care in the US was $7290; in France it was $3601 and in the United Kingdom, $2992. Upon passage of the health care bill in the House, President Obama declared "Tonight, in an historic vote, the House of Representatives passed a bill that would finally make real the promise of quality, affordable healthcare for the American people." If those numbers don't improve, historic may become a synonym for meaningless.