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Bad budget gimmicks in the Senate health-care bill

house-vs-senate-one-year1.jpg

That graph comes from Donald Marron, and does a nice job showing that the bulk of the Senate bill’s initial price advantage over the House bill is simply due to the Senate bill delaying implementation till 2014. It is, to be sure, actually the case that the Senate bill is better on cost control than the House bill.

But cost controls take a while to bear fruit. The Senate bill, which clocks in a bit beneath $900 billion, looks a lot cheaper than the House bill, which clocks in a bit above $1 trillion, because the House bill begins in 2013, while the Senate bill begins in 2014. That means the Senate bill’s spending, and its level of spending growth, is always a year behind the House bill.

So far as budget gimmickry goes, this isn’t the world’s worst offense. But it’ll mean that real people suffer for no good reason. We think the problems of the un- and underinsured are significant enough to require a fix that will cost trillions over time. But we’re trying to save a couple bucks by starting that fix in 2014 rather than 2013? That’s not fiscally responsible (the bill is deficit-reducing), and it’s not really fiscally irresponsible (save in that the bill is deficit-reducing), but it’s stupid.

It’s also not the fault of the 10-year budget window, as people commonly assume. It’s the fault of the president, who lowballed health-care reform by setting the $900 billion limit, and of the Senate, which has refused to simply admit that reality and give the bill sufficient funding.

By Ezra Klein  |  December 2, 2009; 12:17 PM ET
Categories:  Health Reform  
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Comments

Thanks to Ezra and commenters for previous info. I'll bring the topic to this thread now. After reading CBO, Ezra, and Dylan, I still see nothing which speaks to the premium rates for people without subsidies buying insurance on the individual market. CBO says premiums will increase 10-13 percent on the individual market, but this will primarily be driven by subsidized people buying better policies. It seems to say that the same individual policy will cost less under HCR than it would without, but doesn't seem to say why. And it seems to not deal at all with the fact that premiums will continue to rise 10-20 percent a year -- just addresses the relative cost of policies with or w/o HCR. So let me be an average joe type of voter here: I'm not eligible for a subsidy. Are my premiums going to continue going up 10 - 20 percent a year?

Posted by: AlanSF | December 2, 2009 12:30 PM | Report abuse

Although it may turn out to be deficit neutral, although it's hard to imagine any Gov't program accomplishing that feat, the biggest issue will be the unintended consequences of all the fine print, and the fact that in pandering to all the special interests, the bill still won't address tort reform or interstate policies.

Posted by: apberusdisvet | December 2, 2009 12:31 PM | Report abuse

I've long thought the delay in implementation will be politically costly. I've suggested on my blog months ago to start most reforms by the end of 2010.

But...one interesting thing to consider:

Health Care itself is now a bursting bubble.

It will have massive system wide disruptions and financial crisis.

Right now, more or less, 2010-2011.

So...if reform happens after that, say anytime from 2012 on, then reform itself avoids some of the massive, massive fallout of the Bursting of the Health Care Bubble.

http://findingourdream.blogspot.com/2009/10/great-american-health-care-bubble-or.html

So....it's like harsh medicine, but now I think it's better that reform mostly waits until 2012 or later. Further, I don't even think the 65% subsidy of COBRA that will expire soon should be too generously extended. This is harsh medicine we should swallow. Better to let the bubble burst first.

Posted by: HalHorvath | December 2, 2009 12:37 PM | Report abuse

Ezra, the worst offense is pretending that this bill will reform the system and reduce the cost of health care. Mickey Kaus correctly pointed out today that you, like a lot in the MSM, went in the tank in regards to the CBO analysis of the effect of legislation on premiums.

This blog has stopped being a place to look for objective reporting.

Posted by: truth5 | December 2, 2009 12:37 PM | Report abuse

AlanSF, worse than that. Your premiums are going to be higher than they would be under current law. Ezra and others say thats fine with them because you'll be getting a more generous health plan. But the never stop and ask, what if you DON'T WANT a more generous health plan - that is even more expensive than what is currently available. This is not HCR, this is taking a bloated, expensive system, and expanding it and mandating it.

Posted by: truth5 | December 2, 2009 12:41 PM | Report abuse

AlanSF: I don't think anyone knows the answer, but I'm willing to bet premiums in the exchange will exceed the overall 8% growth in health spending because, in the words of Willie Sutton, that's where the [subsidy] money is.

Posted by: bmull | December 2, 2009 12:44 PM | Report abuse

I'm waiting for Ezra to respond to Mickey Kaus who called his CBO analysis "particularly disingenuous".

Posted by: truth5 | December 2, 2009 12:49 PM | Report abuse

*I'm waiting for Ezra to respond to Mickey Kaus*

What on earth would he want to respond to Mickey Kaus for? Kaus isn't really taken seriously.

Posted by: constans | December 2, 2009 12:59 PM | Report abuse

Ick! Hard to stomach Mickey Kaus as a source, but he does seem to be saying the same thing I thought. And truth5, you're definitely right -- current "reform" locks in the worst inefficiencies and waste of the current system, locks out the most promising cost-saving avenues, requires not just coverage but better-than-now coverage and for many people does nothing to help them afford it, adds new layers of mandate-enforcing bureaucracy and paperwork, and throws gazillions of dollars at private insurance companies to support their profits, bonuses, megasalaries, and lavish Super Bowl parties. My premiums will keep going up 10 to 20 percent every year until, praise Ceiling Cat, I'm old enough for Medicare.

Posted by: AlanSF | December 2, 2009 1:04 PM | Report abuse

The House bill going into effect in 2013 isn't so great either. Is there any real reason other than artificially reducing the price tag on the bill for it to take 3 years after the bill is signed to take hold?

Posted by: redwards95 | December 2, 2009 1:14 PM | Report abuse

"But we’re trying to save a couple bucks by starting that fix in 2014 rather than 2013?"

Isn't the better question why we're starting in 2013 or 2014 versus 2010 or 2011?

Posted by: wisewon | December 2, 2009 1:22 PM | Report abuse

Yes, but if the political reality at this point, due to all of the political flaws and mistakes made, is that we have a choice between a universal coverage bill with strong subsidies that starts one or two years later, or one with weak subsidies that starts one or two years earlier, then the one with the strong subsidies may easily be much better.

It may be a very popular success that started in say 2014 rather than 2012, versus a program that has serious problems and serious disillusionment, and that perhaps even falls apart because so many healthy young and lower income people don't buy insurance and just pay the fee due to the subsidies being too small.

Posted by: RichardHSerlin | December 2, 2009 1:22 PM | Report abuse

"But cost controls take a while to bear fruit."

They take even LONGER when you require pilot projects that replicate learnings that already exist, and handcuff potentially promising reforms like a Medicare Commission to not try anything tough until 2019.

If we wanted to start cost control in 2010, we could. It would still take time to bear fruits, but the current reform is looking at those being fruit in 2020+, if at all.

Posted by: wisewon | December 2, 2009 1:24 PM | Report abuse

Neither of the bills has "strong subsidies." We can't afford strong subidies without real cost control. Taxing employer benefits is not cost control any more than taxing food is weight control. It hits the middle class hard and the bloated health industry continues to grow.

Posted by: bmull | December 2, 2009 1:33 PM | Report abuse

More fallout of mandated coverage with no real cost controls: Youngish people, faced with the competing priorities of paying rent, paying off student loans, possibly saving to buy a house, and whatever else, will now have to buy expensive health insurance or pay a penalty. Most of them will not get sick, and only a tiny unlucky fraction will have their premium payments recouped in services received. I'm not saying it's prudent not to buy health insurance, but the political reality is that a goodly number of youngish voters are going to think this is a really bad deal.

Posted by: AlanSF | December 2, 2009 2:17 PM | Report abuse

"Isn't the better question why we're starting in 2013 or 2014 versus 2010 or 2011?"

Because the feds and states need years to build these incredible new bureaucracies that are going to save us all so much money.

"'But cost controls take a while to bear fruit.' They take even LONGER when you require pilot projects that replicate learnings that already exist [in the private market]."

The feds, with their typical myopic vision, believe that Medicare is the source of all innovation. Yeah, right, and I've got this bridge to sell you. . . Medicare is so innovative that it is fiscally solvent and has rooted out all fraud and abuse in its program. Oh, wait. . .


Posted by: Policywonk14 | December 2, 2009 3:24 PM | Report abuse

wisewon-"Isn't the better question why we're starting in 2013 or 2014 versus 2010 or 2011?"

I think mostly because of political pressure, and that the delay is fortunate since the currently bursting (already bursting? Yes, there's evidence) bubble in health care would be blamed on reform if reform came mostly in 2010-2011.

Posted by: HalHorvath | December 2, 2009 3:28 PM | Report abuse

Wisewon is right -- we need to start with the cost control now.

From what I can tell, the cost of individual coverage will jump considerably between 2010 and 2014 as insurers are obligated to assume more risk without increasing the number of healthy young adults (which will only kick in with the mandates). At that point, those who are paying their own way will see premiums stabilize ... at higher levels than we would expect from the status quo.

Neither situation is acceptable to me. The cost of health insurance is not the problem to be solved; it's the cost of *care* that has put insurance out of reach for so many while bankrupting so many more. I thought we were going to get actual reform; that we would be put on a path to some sort of real universal plan in a way that would avert individual, corporate, and government bankruptcy. What we're getting instead, is more of the same at an accelerated pace.

Posted by: Athena_news | December 2, 2009 4:24 PM | Report abuse

Mr. Klein:

Since you've finally acknowledged the "reform" in these bills is based on smoke and mirrors, believe you should read Jonah Goldberg's column today, "Washington, Home of Intellectual Hypocrisy."

"The most famous story of an intellectual hypocrite getting his comeuppance is the tale of George McGovern and his inn. The senator, 1972 presidential nominee and college professor thought he could run a vast, technologically sophisticated nation with a diverse population and an entrepreneurial culture. Then, after leaving Washington, he bought an inn in Connecticut to while away his retirement years. For a guy as smart as him, running an inn should have been child’s play. But it went belly-up before the end of the year, with a contritely befuddled McGovern marveling at how much harder running a business was than he thought." [http://article.nationalreview.com/?q=OWJmZjkzNjYzNGVlZDU2MjE4MTQ0MTVlYjVhM2Q4MDg=]

Why do you think you can run our lives and one-sixth of the national economy to boot??

Posted by: dturnerc | December 2, 2009 4:38 PM | Report abuse

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