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Congressional Budget Office: Reform will bring down the cost of health-care insurance

The Congressional Budget Office released a report (pdf) today estimating changes to average premiums under the Senate health-care bill. The report is going to prove very important, and is going to confuse a lot of people. So let's be very, very clear about what it says.

The CBO's analysis broke the health-care system into three parts: individual, small group and large group. The small- and large-group markets account for 159 million Americans, and have very little change in premiums. But what change they see is in the right direction: Health-care reform is expected to reduce premiums in the large group market by about 1.5 percent, and in the small group market by about 0.5 percent.

The individual market is where the big changes happen. In 2016, which is the year CBO examines, this market is expected to serve 32 million Americans. And in this market, average premiums are expected to rise by 10 to 12 percent. What's important, however, is why.

The CBO sees the changes coming from three different sources. First, "the average insurance policy in this market would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits." This accounts for all of the increase in premiums. In fact, it accounts for much more than the projected increase: The improvement in the insurance obtained on the individual market would, on its own, raise prices by up to 30 percent.

But the increase is moderated by two other policy changes. First, the new rules governing the insurance market are expected to make the market more efficient, lowering prices by 7 to 10 percent. Second, the individual mandate, alongside the subsidies and the increased ease of purchasing insurance, is expected to bring in healthier folks, which should save another 7 to 10 percent. Add it all together and we're looking at a 10 to 12 percent increase in premiums for insurance that's about 30 percent better than what people are getting now. It's a steal. And all this is before we get to subsidies.

The CBO estimates that 57 percent of people in the individual market will receive subsidies to help them purchase health-care insurance (folks on the individual market tend to be much lower-income, with much less stable employment). Those subsidies will reduce premium costs by between 56 to 59 percent for the average beneficiary. So in the final analysis, the effect of reform on your typical individual market purchasers is to give them insurance that's about 30 percent better but only 10 to 12 percent more expensive, and then assure them subsidies that will lower their payments by more than 50 percent. And if you're in the small group or large group markets, your premiums are expected to fall a bit.

Good deal, no?

And all this is in advance of the real cost-saving measures in the bill. CBO is looking at 2016, which is long before the delivery system reforms will have really begun working, or the excise tax will have started restraining the growth in premiums costs, or the Medicare Commission will be aggressively experimenting to bring down costs first in Medicare and then in the system more generally. These are the numbers, in other words, from a world in which none of the cost control efforts work. In that world, health-care reform still does an enormous amount to help 30 or 40 million people, and a bit to help tens of millions more.

By Ezra Klein  |  November 30, 2009; 12:45 PM ET
Categories:  Health Reform  
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Comments

And yet, I guarantee that all we're going to hear this week on the floor is that "The CBO says this bill will raise your health insurance premiums 10 to 12%."

Posted by: _SP_ | November 30, 2009 1:09 PM | Report abuse

It's already being misinterpreted by the mainstream media. http://thehill.com/homenews/senate/69763-cbo-report-predicts-increases-in-insurance-premiums

It's so disgusting, because pretty soon, after Republicans harp on it to death, this will become the new conventional wisdom. The mainstream media HAS to do better than this.

Posted by: byelin | November 30, 2009 1:13 PM | Report abuse

byelin wrote: "It's already being misinterpreted by the mainstream media."

Don't worry about the MSM. They refuse to discuss the budget gimmickry involved in both the House and Senate bills. Both are touted as "reducing the deficit" over the next 10 years when, in fact, those numbers are based on tax hikes starting immediately and spending starting in year five or six.

If you consider ten years of tax hikes and a full ten years of spending, you have an increase to the deficit of at least one trillion dollars.

The fake Chinese president on SNL has figured this out. Why can't Ezra Klein??

Posted by: dturnerc | November 30, 2009 1:29 PM | Report abuse

dturnerc,

You couldn't be more wrong. Look at the second ten years--with ten years of the taxation and ten years of the spending--and the reduction in the deficit is even greater than in the first ten years. But I guess you aren't interested in the truth, just repeating the lies of Fox.

Posted by: michiganmaine | November 30, 2009 1:33 PM | Report abuse

For the sake of argument, assume that I'm a small business owner now paying 50% of each employee's health insurance premiums. This 50% happens to be greater than the fine I would pay by providing no insurance to my employees, so I start paying the fine and stop paying the 50%. Each employee is then subject to the individual mandate and will pay both the 50% I used to pay plus the 27 to 30% increase estimated by CBO (p. 6) less the 7 to 14% reduction loosely anticipated by CBO. As the employer in this example, I'm money ahead & happy. My employees, though, are perceiving a 63% jump in health care premiums.

I'm not certain employees paying the extra 63% are going to be delighted to know that their money is going to help the needy, but the unemployed receiving the new Federal subsidies will be delighted.

Posted by: rmgregory | November 30, 2009 1:34 PM | Report abuse

Ezra - You ignore an important point: many middle income Americans will be forced to spend more on healthcare if the Senate bill is passed. It may not matter to them whether the actuarial value is higher or that the gov't will mandate more benefits. It's like telling someone who wants to buy a Ford pick-up that a new Mercedes is a better deal. Maybe so, but that doesn't matter if you don't want to (or can't) spend the extra money.

Posted by: MBP2 | November 30, 2009 1:41 PM | Report abuse

Wow, rmgregory, that's some impressively bad math. If you're an employer who stops paying the 50% without subsequently increasing your workers pay by an equivalent amount, you aren't going to have your workers for very long. And before you argue that employers will pocket the money, why don't they just cut everyone's base pay by 10% tomorrow and pocket the money? Or 20%? Surely they'd rather keep those profits!

Posted by: _SP_ | November 30, 2009 1:53 PM | Report abuse

And yet, I guarantee that all we're going to hear this week on the floor is that "The CBO says this bill will raise your health insurance premiums 10 to 12%." Hello, itthe CBO says that. Don't worry though, it will be 30% better! (whatever the hell that means)

Posted by: obrier2 | November 30, 2009 1:55 PM | Report abuse

Question: What's to prevent the insurance companies from following the lead of the credit card companies and jacking up rates significantly between now and 2014?

Posted by: DAinLA | November 30, 2009 1:59 PM | Report abuse

"whatever the hell that means"
Good logic. "It will cost more if I ignore or pretend to not understand the parts that save people money." Have you considered running for Congress as a Republican?
To summarize: The base premium for the individual market (only 17% of Americans) will be 10% higher. However, as those 17% are poorer, most of them will have some subsidy so they aren't paying the full base premium. Furthermore, that premium will reduce their out of pocket costs for health care, and long term will reduce health care costs because it covers more things like preventive care that people don't currently get because it isn't covered.

Posted by: _SP_ | November 30, 2009 2:01 PM | Report abuse

"Wow, rmgregory, that's some impressively bad math. If you're an employer who stops paying the 50% without subsequently increasing your workers pay by an equivalent amount, you aren't going to have your workers for very long. And before you argue that employers will pocket the money, why don't they just cut everyone's base pay by 10% tomorrow and pocket the money? Or 20%? Surely they'd rather keep those profits!

Posted by: _SP_"


Have you noticed the current unemployment rates? And yes, employers are already cutting overtime, offering lower wages to new hires etc. Not all of them will follow rmgregory's formula but many who are on the bubble of staying in business will see it as a viable option. No, the employees will not like it but what is their choice? Is anyone over 40 really going to quit a job in this environment?

Posted by: WoodbridgeVa1 | November 30, 2009 2:02 PM | Report abuse

Ezra, as an actuary, I'm not so sure averages for all policyholders is a good measure. After all, the goal is to make health insurance affordable to everyone.

I think a better measure would be to compare what premiums would be like at your age and what premiums would be like for a 62-year-old. Will the 3:1 age rating make health insurance affordable enough for a 62-year-old? Add in the 1.5:1 smoker rating, and how affordable will health insurance be for a 62-year-old smoker? Will a 2:1 age rating and a 1.5:1 smoker rating make health insurance affordable for a smoker your age?

We shouldn't just look at averages. We need to look at the costs at each individual age.

That said, of course the Exchange is going to lower premiums for those in the individual insurance market. Agents who collect 15-20 percent first-year commission per policy in the individual insurance market will no longer receive such, and the savings will be passed onto individual insurance consumers in the form of lower premiums. The same is true of the costs of medical underwriting: with limited medical underwriting, those savings will also be significantly lower once the Exchange is set up, and these savings will be passed onto individual insurance customers in the form of lower premiums.

Posted by: BradGabel2002 | November 30, 2009 2:07 PM | Report abuse

michiganmaine wrote: "Look at the second ten years--with ten years of the taxation and ten years of the spending--and the reduction in the deficit is even greater than in the first ten years."

michiganmaine: Thanks for your comment. Would appreciate a link to support your assertion. The whole point of delaying the spending was yet another budget gimmick to make "re-form" appear less costly than it really is.

This tactic still doesn't take into account the propensity for Washington to overestimate tax revenues and underestimate spending. Then there's issue of whether all those glorious health care spending decreases will actually occur. For example, the bills assume doctors fees won't increase. The "doc fix" alone is several hundred billion dollars over a ten year period. That fix will happen.

Would only add that, since I don't have cable, it's clear neither of us watches Fox.

Posted by: dturnerc | November 30, 2009 2:11 PM | Report abuse

--"Reform will bring down the cost of health-care insurance"--

LOL. And if it doesn't, Klein will be all sad, and enter a short period of really, really deep introspection, which will last until the next flying pig of a socialist scheme is hoisted up to its diving board.

Posted by: msoja | November 30, 2009 2:25 PM | Report abuse

so i'm guessing this whole "bending the cost curve" is out the window then. Wasn't that one of President Obama's requirements?

In 2016 CBO expects that:

the average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law. In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law.


You know they're getting mighty close to that cadillac tax for the average person. Wonder how well that's going to go over when by approx 2019 the average person will be paying the penalty.

So basically we're spending $850 billion over a 10 year time frame to give out free insurance to those deemed too poor to afford it as well as subsidies to many others and we're NOT reducing costs as a tradeoff.

YOu see the costs remain the same its just a matter of WHO PAYS THE COSTS, ie the gov't or you the individual. Nice job of kicking the can down the road.


Can we also expect to look back on this report with disdain similar to the report back in 1965 that said Medicare would cost $9 Billion in 1991 but in essence cost $61 billion. Wake me when its 2016 and then I'll see who was right.

Posted by: visionbrkr | November 30, 2009 2:36 PM | Report abuse

dturnerc: "Would appreciate a link to support your assertion."

I guess you don't read the news or this blog. But when the initial CBO report came out on the Reid bill its conservative estimate (and the CBO is non-partisan) was that in the second ten years a $650 billion reduction in the deficit would be achieved.

Since you don't read the news, here is a link: http://tpmdc.talkingpointsmemo.com/2009/11/cbo-senate-bill-costs-849-billion-major-deficit-reducer.php

"This tactic still doesn't take into account the propensity for Washington to overestimate tax revenues and underestimate spending." That was from the CBO not a city named "Washington". Get your facts straight. Your arguments are a massive fail.

Posted by: michiganmaine | November 30, 2009 2:45 PM | Report abuse

1. The money for the subsidies isn't coming from thin air.

2. Forcing young, healthy "folks" to buy more insurance than they need at artificially inflated prices won't bring down the total cost of health care in this country (as a percentage of GDP).

3. The shell games aren't fooling most Americans (certainly not fooling most American voters). http://3.ly/6ek ... http://3.ly/Fwj

Posted by: rightklik | November 30, 2009 2:48 PM | Report abuse

I took a quick look at the report and was very disappointed that the results were reported in terms of average premiums only (over all geographical areas and age groups up to 65). This is very misleading.

What's more important for an individual is to know how the premiums will be impacted for their age group and whatever other variables will be used to set premiums (region of the country, smoker, etc), as pointed out by the actuary posting above.

The average premiums quoted were very high for our geographical area (SoCal) for all ages groups, but especially so for those in their 20's and 30's. Are the young gonna get taken to the cleaners on this?

Posted by: Beagle1 | November 30, 2009 3:09 PM | Report abuse

@BradGabel2002 -- you've got it right on the cost. By averaging out the cost of individual health insurance, CBO/JCT masks the fact that the young healthies will pay more than present, while the older sickers will pay less, an inconvenient truth.

And CBO/JCT ignores the fact that in 2016 the small penalty for noncompliance (only $750) likely means that most young healthies will choose not to obtain individual health insurance coverage which is many times more costly than the minimal penalty. I guess CBO/JCT just assumes that young healthies will "do the right thing" and take up coverage.

If you're old enough (Ezra isn't), you may recall the death spiral of individual health insurance in several state markets in the early 1990s when there was GI/community rating with no individual mandate. Under federal reform, though, the lion's share of the greatly increased premiums in the individual market will be borne by taxpayers, as probably only the subsidized population (read: lower income, not Medicaid eligible, and sick) will be able to "afford" individual health insurance.

But I don't think you're entirely correct on the agent commission issue. Sec. 1312 (at pp. 157-158) says HHS will establish procedures for states to permit agents and brokers to enroll individuals in either individual or small group coverage. Those procedures may include agent/broker commission schedules. I think after NAHU has its say, agents/brokers will still receive some sort of commission, although perhaps not as large a percentage as at present.

Posted by: Policywonk14 | November 30, 2009 3:23 PM | Report abuse

michiganmaine: I can't spend any more time on this now. Will try to look at your link tonight.

A lot less snark would be appreciated. Some of us CPA's aren't total morons. The onus to spend gazillions of dollars we don't have is on you, not me.

Posted by: dturnerc | November 30, 2009 3:32 PM | Report abuse

visionbrkr- read the post:
"And all this is in advance of the real cost-saving measures in the bill. CBO is looking at 2016, which is long before the delivery system reforms will have really begun working, or the excise tax will have started restraining the growth in premiums costs, or the Medicare Commission will be aggressively experimenting to bring down costs first in Medicare and then in the system more generally."
You're complaining that costs aren't contained for a year when the cost containment measures haven't kicked in. Brilliant.

Posted by: _SP_ | November 30, 2009 3:44 PM | Report abuse

visionbrkr,
$7,800 in 2016 is worth less than $7,800 today. Inflation, wages etc will go up over the next 7 years. Hence that 2016 figure represents an important reduction in the premium. What no one disputes is that people will pay more in premiums if we keep the current system. At the current rate of health inflation, the average policy for single premiums would be what in 2016, $12,000?

Posted by: xango | November 30, 2009 3:54 PM | Report abuse

That said, of course the Exchange is going to lower premiums for those in the individual insurance market. Agents who collect 15-20 percent first-year commission per policy in the individual insurance market will no longer receive such, and the savings will be passed onto individual insurance consumers in the form of lower premiums. The same is true of the costs of medical underwriting: with limited medical underwriting, those savings will also be significantly lower once the Exchange is set up, and these savings will be passed onto individual insurance customers in the form of lower premiums.

Posted by: BradGabel2002 | November 30, 2009 2:07 PM | Report abuse

I likewise agree with policywonk14 on this. Agents in NJ get $10 PMPM which is much more responsible than receiving a percentage of premium which also increases costs unnecessarily as costs go up and leaves many agents in business collecting checks that are undeserved. No state that I'm aware of pays 15-20% commission in the individual market. I sure hope that isn't really the case.

Posted by: visionbrkr | November 30, 2009 4:00 PM | Report abuse

So how does the cost of the basic plan in the exchange compare to a comparable plan in an unreformed market?

Certainly, the average is going to increase if you eliminate high-deductible "catastrophic" policies. But what happens if you compare apples to apples?

Posted by: eleander | November 30, 2009 4:23 PM | Report abuse

xango,

I won't be as rude as _SP_.

In that same small group market they estimate it would be the same amount $7800, not $12000. So basically we're spending as i said $850 billion+ to hand the poor health insurance at today's exorbident costs as opposed to actually doing something to rein in those costs when the administration and everyone out there has allowed themselves to be run over by special intrests from doctors, to hospitals to insurers to Pharma.

_SP_,

and you're assuming they'll go ahead with those cost cut recommendations when they can't even do the "doc fix" without controversy not to mention the mammogram mess and cervical cancer screening fiasco. Do you really in your heart believe that the government will cut costs. I KNOW Sec. Sebelius already said that the task force's recommendation are going to be ignored. What reasonable belief can we have that CER will work. Basically we're doing cost cutting "pet projects" at cost that government won't have the "stones" to implement.

Oh and while I agree with the excise tax it was raised and it is not as if the figure is stagnant. It increases with inflation +1%.

Again there are much better ways to truly cut costs. LIke maybe you don't have 12 years until biologics allow generics. Don't give away savings to hospitals. Make insurers more accountable with MLR's approaching reasonable levels of 85-90% instead of 75-80%.

But sure fool yourself to think this cuts costs. I'll be the one saying "I TOLD YOU SO" in 2019.


They also at CBO made sure they put this in there that Ezra so conveniently leaves out of his assessment:

All of those considerations serve to emphasize the considerable uncertainty that surrounds any estimate of the impact of any proposal that would make substantial changes in the health insurance or health care sectors, given the size and the complexity of those sectors. That uncertainty applies to the estimated effects of proposals on the federal budget and insurance coverage rates, as well as to their impact on premiums.


So in other words, "we could be wrong."


Also why do they not analyze it past 2016? Won't they like what their projections show???

Posted by: visionbrkr | November 30, 2009 4:24 PM | Report abuse

I would like to support health care reform but I have a really hard time with this bill. Maybe I just don't understand where the savings are coming from. Just because the CBO says it's going to happen doesn't mean I believe it. These are the things I am worried about in this bill:

1. It seems like a great deal of savings come from cuts in Medicare payments to doctors and hospitals. Another Congressional study has shown that many doctors and hospitals may need to drop medicare coverage because they won't be able to afford the cuts. If this happens how does this help seniors looking for medical care? I read about this study on MSNBC btw. If the cuts are backed out of the bill at a later date where are the majority of the savings going to come from?

2. If there are no changes in tort reform how do doctors stop practicing preventive medicine? Wasn't one of Obama's goals to stop unnecessary tests? What will the effect of medical malpractice insurance be with health care reform? If premiums continue to rise won't doctors and hospitals have to pass the increased fees onto their patients?

3. Where is the competition really coming from. From what I have read states still will determine which insurance companies will operate in their state. If a state doesn't license many companies and you only add the public option, how is that increasing the competition to any large degree. Also if a state opts out of the public option, how is greater competion even possible?

4. With all of the new patients coming into the system won't there be a shortage of doctors, hospitals, and nurses. If there is a shortage won't supply and demand drive up health care costs and obliterate any savings?

I really want health care to work. I just don't see how this bill does anything except for those who currently don't have insurance. The government has a habit of putting in entitlement plans that they under estimate and/or don't fund properly.

Posted by: Silmiril | November 30, 2009 4:28 PM | Report abuse

Look, if you don't think they'll actually cut costs as outlined in the bill, fine, then you think that health care will be 120% of GDP in a few decades. But the same argument applies to the cost cutting measures you propose. How else are they going to try to cut costs than by passing a law that says they'll cut costs? Would it be better to not pass cut proposals and instead hope for the medical savings fairy to make things better? Broder makes the same argument- sure, they have a law that CBO says reduces the deficit, but I don't really believe it so let's do nothing instead, la la la la la I can't hear you. As Ezra often says, people complain about the changes in the bill without comparing them to the costs of doing nothing.

Posted by: _SP_ | November 30, 2009 4:36 PM | Report abuse

>>So in other words, "we could be wrong.">I KNOW Sec. Sebelius already said that the task force's recommendation are going to be ignored.<<

No, you're making stuff up by conflating two different organizations that focus on two different aspects of health care services. FWIW, most of the cuts in the bill aren't just recommendations, they're actual cuts.

Posted by: eleander | November 30, 2009 4:45 PM | Report abuse

"So in other words, "we could be wrong.""

As if the preemptive "I told you so" didn't make it obvious enough, you know you're dealing with a die hard ideologue when they interpret someone else's rational uncertainty as justification for their own sense of absolute certainty.

Posted by: eleander | November 30, 2009 4:46 PM | Report abuse

spending $10 to save $1 makes no sense

especially since the Economist has pointed out that most of these costs are covered up, and, correctly accounted for, the bill is more lik $2.5 trillion.

why dont we just get rid of all that waste, fraud and abuse that Obama talks about and leave it at that? are are we getting black mailed by the president and his party to pass a bill which will hamper our efforts to balance the budget before he will get rid of this waste and abuse?

shouldnt that be a given?

Posted by: dummypants | November 30, 2009 5:06 PM | Report abuse

the individual mandate is non-starter

dont ask me, obama said so himself during the campaign last year.

this bill is way worse than the republicans efforts to reform social security

Posted by: dummypants | November 30, 2009 5:09 PM | Report abuse

dturnerc: "A lot less snark would be appreciated. Some of us CPA's aren't total morons. The onus to spend gazillions of dollars we don't have is on you, not me."

You started the snark in your first post, which was based on a combination of MSM lies and ignorance of the actual CBO report. If you want to make arguments at a blog like this, at least get your facts straight--fact, by the way, that have been discussed here on the blog. And if you didn't know these basic facts about the bill--now that you admit to that ignorance--then why were you here spouting the Republican talking points on the subject? Why make the claims you did in your first post if you don't even know the most basic facts about this bill?

This bill reduces the deficit and begins to bend the cost curve for insurrance. So enough of this garbage about spending money we don't have. We don't have the money to not do this bill. If this bill is derailed then we are in big, big trouble.


-

Posted by: michiganmaine | November 30, 2009 5:26 PM | Report abuse

NO no no no, you are wrong.

Posted by: affirmativeactionpresident | November 30, 2009 5:48 PM | Report abuse

And all this is in advance of the real cost-saving measures in the bill. CBO is looking at 2016, which is long before the delivery system reforms will have really begun working, or the excise tax will have started restraining the growth in premiums costs, or the Medicare Commission will be aggressively experimenting to bring down costs first in Medicare and then in the system more generally.

----

Erza Klein is continually guilty of this type of casual, wishful narrative when he discusses the various legislation. The key question when it comes to cost is how will this curve be changed:

http://www.cbo.gov/publications/collections/health.cfm

There is absolutely nothing in Mr. Klein's comments that even remotely addresses this critical question.

Erza, what about a graph or two, or some actual data?

Posted by: JamesSCameron | November 30, 2009 7:39 PM | Report abuse

"To summarize: The base premium for the individual market (only 17% of Americans) will be 10% higher. However, as those 17% are poorer, most of them will have some subsidy so they aren't paying the full base premium. "

This is a fallacy -- there is no evidence at all that those who are currently paying for their own health insurance are poorer and would be eligible for subsidies. Those of us who are paying 100% of our own premiums today subsidize employer plans through the tax exemption and get no consideration whatsoever now or in any of the proposed changes. I haven't read a single word from Ezra or any of his favorite analysts about that. Why isn't the mandate accompanied by a exemption for individuals who purchase their own policies -- not a deduction,which applies only to those who itemize, but an actual exemption?

Nor are all the currently uninsured poor -- many are simply unable to obtain affordable coverage due to pre-existing conditions. And there is NOTHING in this bill that would make insurance more affordable for them. The bill says they can't be denied but that won't help them when premiums turn out to be very expensive.

The bill does nothing at all for those who are over 55 but not on a corporate pension either. Again, they are not "poor" but they do need affordable coverage.

Journalists in the MSM and their readers are appallingly ignorant about the way Medicaid (which is how this is being implemented) works. The "poverty level" guidelines are just one of the factors that determine whether or not people can tget assistance. Middle-class homeowners have too many assets to qualify for any assistance. In most states, individuals without children are not eligible either. In many states, women with children qualify but not fathers.

There is nothing in this bill for middle-class citizens who are already struggling to pay for their own coverage. Their premiums are going to go up and they get NOTHING for it.

Posted by: Athena_news | November 30, 2009 9:14 PM | Report abuse

"This is a fallacy -- there is no evidence at all that those who are currently paying for their own health insurance are poorer and would be eligible for subsidies"

"CBO estimates that 57 percent of people in the individual market will receive subsidies to help them purchase health-care insurance (folks on the individual market tend to be much lower-income, with much less stable employment)."

You say no evidence, I say evidence, potato, potahto...

Posted by: _SP_ | November 30, 2009 9:17 PM | Report abuse

michiganmaine: Read your TPM link touting the rollout of Sen. Reid's bill: "The health care bill...will require $849 billion over 10 years in new spending, to be paid for with cuts to Medicare, while reducing the deficit by $127 billion.
Over the second 10 years, CBO projects even greater cost savings--up to $650 billion."

These promises to save money are a stretch that beggars belief: "As the CBO analysis indicates, the bill's real 10-year costs would start in 2014. And in its true first decade (2014 to 2023), the CBO projects the bill's costs to be $1.8 trillion -- double the price Reid is advertising.

"And that's even though the CBO optimistically assumes the government-run "public option" wouldn't cost a cent.

"Over this same 10-year span, the bill would hike taxes and fines by $892 billion -- more than the alleged price of the bill.

"Just as problematic are the bill's effects on entitlement spending and deficits. Medicare is already teetering on the edge of insolvency. This year's Medicare Trustees Report (signed by Health and Human Services Secretary Kathleen Sebelius) warns that the Medicare Hospital Trust Fund -- the main funding channel for the largest part of Medicare -- will become insolvent in 2017.

"Among the $802 billion that Reid would divert from Medicare is $431 billion in cuts in doctors' pay (far more than the misleading figure for 2010-19). The bill says it would cut payments to doctors for services to Medicare patients by 23 percent in 2011 -- and never raise them back up, ever.

"No one who's been in Washington for more than five minutes actually expects this reduction to occur -- and if it doesn't, then the Senate health bill would increase our deficits by $286 billion in its true first decade, according to CBO projections."

[http://www.nypost.com/p/news/opinion/opedcolumnists/another_set_of_cooked_books_loFmlm5OEIdYuzuJySXBaN#ixzz0YOkcVYHU]

Pelosi/Reid/ObamaCare is pure snake oil. Its 10 year projection only looks good because the tax hikes take effect immediately and the spending is delayed to 2014. The Medicare spending cuts are phony. In fact, Medicare Trust Fund is being gutted to help pay for this monstrosity. The reductions in doctors fees will never happen. In fact, the Democrats want to do the "doc fix" in a separate bill to hide the cost.

We accountants often employ a smell test to financial transactions. Here, the fact that the government proposes to spend 1.8 trillion dollars over the real 10 year period to purportedly save a much smaller amount of money stinks to high heaven.

Let's have market-based reforms: tort reform, ability to purchase insurance across interstate lines, etc. The federal government does not need to completely take over one-sixth of the economy, with all the attendant problems of even more waste and fraud, loss of liberty, and perverse economic incentives.



Posted by: dturnerc | November 30, 2009 9:21 PM | Report abuse

Look, if you don't think they'll actually cut costs as outlined in the bill, fine, then you think that health care will be 120% of GDP in a few decades. But the same argument applies to the cost cutting measures you propose.

Posted by: _SP_ | November 30, 2009 4:36 PM | Report abuse


The point is that they didn't need to give crappy cost controls and then WATER THEM DOWN FURTHER. Obama wanted 7 year "vesting" for biologics and then it miraculously (thanks to $150 million in pro reform ads) got to 12 years. Do you even have a grasp at what that costs? Think of biologics for cancer treatments that cost at a brand name cost of $40k per year and then multiply that by the millions with cancer. I'm stunned biologic stocks aren't through the roof right now.

Then they took an MLR and watered it down to 75% in the individual market and 80% in the group market. Let me put that into my context as a NJ resident. Currently NJ has an 80% MLR requirement for individual and small employer markets and in 2008 insurers were shown to be working at 85% MLR's. SO basically this reform is telling NJ insurers you can be 10% LESS EFFICENT in the individual market and 5% less in the small group market. And this is reform???


How about the study that showed PharMA increased their costs ahead of reform to show "fake savings". Did you conveniently forget about that??

I gave you example and you IGNORED them or couldn't comprehend them. You want another one that needs to happen but Congress doesn't have the "stones" to do them? Capitation. Sure do it like MA now and do Capitation with incentives for providers that have better success rates, but the key is we need to get away from FFS systems that are bankrupting the country.


Oh and do you think that CBO factored in this study?

http://prescriptions.blogs.nytimes.com/2009/11/17/study-projects-increase-in-obesity-and-its-costs/

I especially love the fact that if obesity didn't decrease but just held to the current level that it would save $200 BILLION a year. Ezra talks about this a little but, but not nearly what should be. This is what costs Americans as compared to the rest of the world. All the rest of the talk of a public option or subsidies are a mere pittance compared to what a healthy america could save as compared to what we are and what we are about to become.

But please don't tax our sugary drinks. That ship sailed a long time ago.

Posted by: visionbrkr | November 30, 2009 9:39 PM | Report abuse

When this whole thing collapses you can wait for 6 months for an MRI like in Canada but Obama Reid and Pelosi will have have their own doctors. You don't have to worry about them. nothing is free in life. Just think for a second. We will spend more money and that way we will save money. that sounds like a drunken guy saying i need another drink to become sober


Posted by: wickliffejeans | November 30, 2009 10:17 PM | Report abuse

Visionbrkr, re: bending the cost curve, Ezra & his ilk engage in the magical thinking that "the excise tax will [restrain] the growth in premium costs." Voila! Cost curve bent. *sarcasm alert*

Those of us that live in the real world know that slapping a 40% tax on insurers and self-funded plans for high-cost plans won't do diddly to reduce medical costs, which are the primary driver of health insurance premiums. All that tax will do is to cause employers and individuals to make every effort to ensure their premium costs fall under the taxable threshold. And, of course, an individual's choice not to take up coverage (due to a weak individual mandate) guarantees that he/she won't reach that bar.

Posted by: Policywonk14 | November 30, 2009 11:01 PM | Report abuse

I admit I haven't yet read the CBO report, but in my experience when someone says "this is going to confuse a lot of people" it usually means a weak argument is about to follow.

Posted by: bmull | December 1, 2009 2:13 AM | Report abuse

SP: "You say no evidence, I say evidence, potato, potahto..."

Umm...your "evidence" actually supports the fact that those who are *currently* paying their own way are not poor and will be negatively affected by the bill under consideration.

43% is not a negligible minority -- it represents millions of working Americans who will be paying substantially more for their coverage and getting less.

And no one in any of these analyses has bothered to ask about singles and childless couples; individuals who are excluded from Medicaid in most states.

Posted by: Athena_news | December 1, 2009 9:13 AM | Report abuse

dturnerc,
Nice try--big fail. You respond to the non-partisan CBO report that shows that your assertions are wrong by cutting and pasting in an opinion piece by the NY Post! That is laughable. At least you could admit you were wrong.

Posted by: michiganmaine | December 1, 2009 9:32 AM | Report abuse

Ezra provides about as biased an analysis of this CBO report as Paul Krugman. I don't know where you can even go anymore to get non-biased, honest analysis.

Bottom line, for about half of the current indvidual market purchasers, their premiums are going to be 10-13% higher than they would be if we did nothing. That's an honest analysis.

Posted by: truth5 | December 3, 2009 4:35 PM | Report abuse

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