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by Stay Cool
on Oct 13, 2009
This is not good. Per this article: Web Link
the committee still does not know what the impact will be on privately insured people! My guess is our rates are going to go up.
Dear Resident: You are right. Read the PriceWaterHouse report on the thread below this one to understand how the rates are projected to rise substantially as a result of Obamacare.
Since you are a Big Government Democrat Statist, I can just hear you clapping and laughing with joy knowing that more of Americans' liberties are being taken away and that more of our income will be distributed to Big Government.
Ben, I don't believe we've met before. My name on these boards is actually Stay Cool. I chose that name to remind myself to stay calm in the face of rude posts like the one you just offered.
Anyway, here is an analysis of the PWC report you are referencing:
"In the hallowed tradition of the tobacco and energy industries, the health insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek to reform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has something of a history with this sort of thing: In the early-'90s, the tobacco industry commissioned PWC to estimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by the Arthur Andersen Economic Consulting group, which concluded that "the cumulative effect of PW's methods … is to produce patently unreliable results." It's perhaps no surprise that the patently unreliable results were all in the tobacco industry's favor. He who pays the piper names the tune, and all that.
All that makes it a bit hard to respond to this analysis. Seriously engaging with its methodology probably gives it more credit than it deserves, making this seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totally ignoring its claims means some of them might live unchallenged. So rather than a full tour through the "analysis," here are a couple of its more representative moments.
A footnote -- how come the good stuff is always in the footnotes? -- on page E-2 of the report sort of gives away the game. It reads: "Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes." That's written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.
To illustrate how this works, let's go back to another PWC favorite: tobacco taxes. Imagine Congress slaps a $10 tax on each cigarette purchased in the continental United States. The impact is obvious: People will virtually cease purchasing cigarettes, or the trade will move onto the black market. But a PWC report that "assumes payment of tax" would assume that cigarette purchasing remains unchanged, and smokers fork over $30 bazillion (approximately) in taxes. This would mark the beginning of a heretofore unknown phenomenon: nicotine bankruptcy.
At least, it would in the world of PWC's report. But it wouldn't do so in the real world. So too with these assumptions. Economists think that the tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don't build it into their estimate. On Page 6, they say, "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed." That's a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.
Or take the assumption of "full cost-shifting of cuts to public programs." What that means, essentially, is that health-care spending is considered a constant, and every dollar that a public program cuts from its payments to hospitals is a dollar the private health-care industry has to add to its reimbursements to hospitals. Have you ever heard of that before, in any industry? If Blockbuster decides to cut costs to consumers by negotiating lower payments to movie studios, does Netflix send out a sorrowful e-mail explaining that it will have to increase its membership fee because it now needs to make higher payments to movie studios?
Another interesting bit comes on Page 2, which identifies "new minimum benefit requirements that may require people to buy coverage that is more expensive than options to which they currently have access" as one of the "root causes" of coming premium increases. In the footnote, the report complains that the Senate Finance plan requires a minimum 65 percent actuarial value (that is to say, 65 percent of what an individual is expected to need), while the Massachusetts plan only requires a 56 percent actuarial value. Other states have no minimum value. Insurers will also be forced to cover preexisting conditions, have an out-of-pocket limit, and end rescissions.
It's true, as the report says, that buying better insurance will cost somewhat more than buying insurance that doesn't cover anything. The vast majority of the people affected by this will be using subsidies, of course, but put that aside for a moment. This is part of the point of health-care reform: Insurers will no longer have the freedom to offer products that let an individual think his family his protected when the policy will do nothing of the sort. That may raise prices, in much the way that antibiotics cost more than herbal supplements, but it raises prices because it reduces the insurance industry's ability to sell a deceptive and insufficient product.
But if the PWC's report doesn't offer much in the way of trustworthy policy analysis, it is an interesting looking at the changing politics of the issue. In short, the insurance industry is getting scared. After many months of quiet constructiveness, they're launching a broadside on the week of the Senate Finance Committee's vote. The White House, which had a pleasant meeting with the industry's leadership last week, was shocked by the report, and so too was the Senate Finance Committee. The era of cooperation seems to be over, and they weren't given much advance warning. But the report might have another impact, too: The evident anger and fear of the insurance industry might do a bit to reassure liberals that this plan is worth supporting, after all."
While I do not agree with the way the GOP is talking about this (Obamacare?), I am concerned about this health care "reform"
My guess, from what I have read is that the poor will be insured but the privately insured people (a great number of middle class americans) will see their rates go up to perhaps unaffordable numbers, yet middle class folks don't qualify for government subsidies. Nothing has been said about illegal immigrants, or other issues.
I was against the reform Clinton proposed in the early 90s, and I am not too happy with what is going on right now.
Stay cool: where are we getting the money to pay for all this healthcare for all? how will this affect the middle class? There are too many unknowns, it is and should be a concern for all.
Ben: I appreciate your concerns, but calling this "Obamacare" will not accomplish much. A friend emailed me something from congressman Fleming- he wants to have those in Congress who vote yes for the public option enroll in it, not a bad suggestion - but when you go to his website, and you see a congressman calling things socialism and obamacare, well, it is hard for me to take anything he says seriously.
I am not happy with Obama (even though I voted for him), but the GOP's valid concerns go unheard because of the way they present them (Obamacare, socialism, etc).
I'm going to attempt to address some of your concerns. In previous threads I've written extensively that the price of doing nothing far exceeds the price of ANY of the health reform proposals being put forward. This year, the average cost for a family of four is 13,800 per year. In 10 years, if nothing is done, those costs will increase by 131% which amounts to 28,500/yr. You wrote, "a great number of middle class americans will see their rates go up to perhaps unaffordable numbers." Without reform this is GUARANTEED to happen. If you can point me to any employer that will be willing to provide healthcare to their employees at a cost of 28,500/year/employee, then get me an application. Keep in mind, this is what will happen if the status quo remains and nothing is done.
Now the report that PWC released yesterday to much fanfare has been pretty thoroughly discredited at this point. They calculated up the total costs of reform without taking into account any of the cost savings that will come along with reform. As one pundit said, this is like pointing out with pride that the Red Sox scored 6 runs the other day, only leaving out that the Angels scored 7 runs to beat them. Here's the statement by PWC today clarifying their report: "The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated." Basically PWC has backed away from their own report.
As for the middle class not being eligible for subsidies, the level of subsidies differ among the plans, but a few of the plans will offer subsidies at 300% the poverty level. For a family of 4, this would be about 66k/yr. Most families that earn above this level are assumed to be working for an employer who provides healthcare and will thus not need the subsidy to buy their own insurance. Plus, there will be incentives and breaks provided to employers to continue to provide coverage to their employees, and if they choose not to they will instead pay into the system that provides those subsidies since they'll be effectively pushing their employees into the ranks of the uninsured. The subsidies will also be funded by penalties on those who choose not to get coverage for themselves and are fined for violating the insurance mandate. This mandate will have minimum income requirements, so don't buy into the notion that some 22 year old kid just out of college with no job will get fined for not buying health insurance. This is for the family of 4 making 50k, eligible for the subsidy, and still not buying insurance.
All of this will be paid for by either a surtax on the top 1% income earners, or a limitation on the amount of itemized deductions a person is allowed (mostly affecting only the top 1 or 2% of earners), or a tax on what are considered "cadillac" health plans that provide high levels of coverage to certain individuals. CBO estimates this plan will actual decrease the deficit over 10 years, and this doesn't even include a public option which the CBO estimate will save an additional 85 billion over 10 years...
The key to all this is providing a robust public option available for anyone to choose. This will provide competition to the private insurers, the public option will function exactly like a private insurance plan, with its members paying premiums to pay its claims, with the difference being that only 4 or 5% of its money will go to overhead and expenses instead of the 20-25% that private insurance plans currently skim off the top. If you implement a mandate to buy coverage, you must provide an affordable alternative for people to choose from.
As for immigration, the Baucus plan explicitly excludes undocumented immigrants, and I vaguely remember reading that documented workers must prove primary residency for 5 years before being eligible to join the plans. So it's not true that nothing has been said or done about illegals in this plan.
As for any thinking that the possiblity of losing your coverage is a distant problem, check out this article in tomorrow's wall street journal that details how healthcare costs are expected to increase for most employees next year:
If nothing is done, the ranks of the uninsured will continue to swell, forcing more people into choosing between medicine or food, bankrupting more americans, causing health costs for the rest to spiral out of control, and explode the budget deficit beyond what it is now with the increased burdens on medicare and medicaid.
Are these plans perfect? No. I'm hoping for the inclusion of a robust public option and other cost containments the Baucus plan left out, but there's still a long way to go between a final version of the bill is released. Stay tuned...
I hope this helps.
A safety net -- Yes. A Government controlled insurance program -- No!
Congress can enact laws that make the insurance industry and individual citizens accountable. However, a government plan, with forced participation in that plan, is not the answer.
In no way is the government option going to be forced participation. The plans will require you to purchase insurance if you meet a minimum level of income, but you are free to purchase that insurance from any provider, you are not mandated to purchase insurance from the government only. The point of the government option is to provide a low-cost alternative to private plans to both provide competition in the marketplace and to provide an option for those who couldn't otherwise afford insurance. The public option plan will operate exactly like private insurance plans (paying its claims from the premiums people pay in) only it will cost less to operate because they're not redirecting 20-25% of their premiums to pay for administrative costs like CEO salaries, etc. Don't believe the propoganda that this is a government take over of our healthcare system. It's not.
You may not care for people using "obamacare" and "socialism" to describe what is going on, but by doing so you are ignoring the obvious. This is obamacare and this is socialism and it will result in higher taxes and debt for everyone (except those who aren't paying taxes now) and is unlikely to improve the overall level of health and healthcare delivery in the US.
Poster boy, I'm sorry if I missed your previous posts on this subject, but wanted to ask you a couple of follow up questions regarding this latest post, please:
Where did you obtain the figures for "the average cost for a family of four is 13,800 per year. In 10 years, if nothing is done, those costs will increase by 131%"?
Also, you did not mention the impact of this plan on Medicare. Are there no reductions in Medicare funding in this plan?
The figures I used I got from a report from the Kaiser Family Foundation. Here's a story about their report:
As for Medicare, the propoganda that there will be cuts is based on the govt discontinuing subsidizing the Medicare Advantage programs that basically funnel money to private insurers to implement the Medicare plan. This will not result in cuts to medicare recipients, but will in fact result in cuts in subsidies to private health insurers, which they are understandably unhappy about. Hope this helps...
The increase of 131% is for the last 10 years, so of course it is GUARANTEED to happen again over the next 10 years?!? Only thing that is guaranteed is that it will not be exactly the same, it will be more, or less.
The PWC report is being called a "sucker punch" by Sen Schumer on CNN today. 'thoroughly' discredited' is an interesting description one day after the report is out. Discredited because the report came from PWC? Discredited by pundits on talk shows?
As PB says, the key to all this is providing a public option. The stepping stone to single payer is the public option plan. The strategy was mapped out by Obama before he became president. Making the wait time for an MRI into a political decision and making private health insurance companies illegal is not what the American people want. They want to keep their health benefits.
If we pass tort reform, it will lower health care costs by reducing the amount of defensive medicine being practiced. It we allow more real competition by removing the antitrust rules and allow insurance companies to sell in all 50 states it will ACTUALLY increase choice and reduce competition.
But these two things cannot happen because of the $$$ that trial lawyers and insurance companies donate to our corrupt politicians. We cannot trust them to give us any real reform in today's political climate. We certainly cannot trust them to run Canada-style health care, AKA single payer.
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