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A health-care reform Rorschach test

I long ago learned that cost estimates are health-care reform's version of a Rorschach test: They tell you more about the reader than the bill. And the early reaction to the latest estimates (pdf) out of the Center for Medicaid and Medicare Services are no different. So here's what you need to know.

First, be clear about what's being estimated. The Congressional Budget Office's estimates look at the deficit. CMS is looking at total national health expenditures. This often confuses people into thinking that there's conflict between the two sets of numbers when there isn't: CBO says that federal spending is going to go up to pay for the coverage expansion, but that savings and revenue will go up by even more, leading to a net reduction in the federal deficit.

CMS is looking only at the spending side. And here's what it finds: In 2019, implementation of the Affordable Care Act will reduce the ranks of the uninsured by 34 million people and increase nation health expenditures by 1 percent.

One percent.

And that 1 percent is actually 1 percent and falling: When the legislation is fully implemented in 2016, the spending increase will be 2 percent. But cost controls kick in over those years and bring it down to 1 percent. Assuming the trend holds, the second decade will see national health expenditures fall below what spending would've been if the bill hadn't passed. So that's the bottom line of the report: We're covering 34 million people and come 2019, spending is expected to be one percentage point -- and falling -- above what it would've been if we'd done nothing.

As that suggests, the CMS study projects only to 2019. That's not very long, given that the bill is implemented in 2014. So it doesn't do much to project how cost controls like the Independent Payment Advisory Board will work in the second decade, which is when they really kick in. The report is also skeptical that some of the Medicare payment adjustments will be implemented. So it's back to the Rorschach test: You can either say the report doesn't do enough to look at how the cost controls will fare once fully implemented or you can say that it's more evidence that the cost controls won't actually be put into place. I'm optimistic on the cost control front, but you knew that already.

I'd also add that there's reason to think CMS is conservative in its cost estimates. In 2003, the Bush administration suppressed the agency's estimate that Medicare Part D would cost $500 billion to $600 billion over 10 years. The Bush administration was wrong to suppress the projection, but the projection itself turned out to be far too high. If you want to get exact about it, the estimate was 37 percent too high, for reasons Richard Foster, CMS's chief actuary, describes here.

All in all, I think the report makes health-care reform look pretty good. A one percentage point increase in spending in return for covering 34 million people? That's a good deal, I think. But your mileage may differ.

By Ezra Klein  |  April 23, 2010; 11:35 AM ET
Categories:  Health Reform  
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Comments

Didn't we invade Iraq because there was a 1% chance they had WMD? Ron Suskind wrote a book about it.

Dick Cheney said, "If there's a 1% chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response. It's not about our analysis ... It's about our response."

This is totally irrelevant, I know, but interesting. We were willing to spend trillions to invade a country that posed no threat, but we hesitate and increasing health care expenditures by 1% even though it will cover 34 M Americans.

Our priorities are all out of wack.

Posted by: nisleib | April 23, 2010 11:58 AM | Report abuse

its interesting that in many people's analysis 1% is nothing when it comes to covering 30+ million people (which I completely agree with btw) but insurers profits are seen as outrageous and instead of looked at as a percentage its given as a dollar amount for shock value.

That being said I'd love to see a study of how many doctors in 2014 and beyond will continue to take medicaid when there's 20 million additional patients on that dime.

Insurance has never meant access and that goes unspoken far too often. While I agree that there's an insurance death spiral, the same can be said of providers accepting medicaid if its rolls are increased too much too quickly.

And as we all know its way too early to talk about these projections because that's really all they are.

Will Republicans run with this as proof that the Dems were wrong. yes. Just as the Dems ran with the CBO report and Ezra's running to get ahead of the future talking points.

Posted by: visionbrkr | April 23, 2010 12:05 PM | Report abuse

Setting aside the numbers, the key point is this: The report is also skeptical that some of the Medicare payment adjustments will be implemented.

These cuts and savings are not going to happen. What's the IPAC going to do other than restrict access? Good luck getting Congress -- any Congress -- to sign off on that.

Posted by: NoVAHockey | April 23, 2010 12:13 PM | Report abuse

People -- really smart people who dedicate their lives to it -- routinely do a miserable job of predicting the future, and the farther you go out in the future the dodgier the predictions. You name it, prices, GDP, particular types technology, predictions of what will occur ten years and more in the future are useless. So, unless you're trying to win some cheap political points with morons, don't bother reading such forecasts.

Posted by: ostap666 | April 23, 2010 12:28 PM | Report abuse

@visionbrkr: "but insurers profits are seen as outrageous"

Here's what the right fails to grasp, leading them to accuse the left of being against even the mere concept of profits: whether it's Exxon making a killing when gas prices were through the roof due to speculation, or insurance companies making profits through rescission and other below-the-belt tactics, or the Wall Street shenanigans we've come to know and love, the consistent theme is making a profit *at the expense of customers*. No one I know has any issue with people making a profit in the market. I haven't seen anyone making that argument online either. What I see is anger directed at greedy unethical companies that maximize their profits through underhanded measures. I know it's politically expedient for the Republicans' "rout the socialists" campaign to equate the left with anti-profit sentiments, but that's just not the case. Make a better widget, or sell your widgets for less, but don't burn down your competitors' factories to raise prices. That's the crux of the issue.

Posted by: BigTunaTim | April 23, 2010 12:35 PM | Report abuse

Ezra writes:
"I'd also add that there's reason to think CMS is conservative in its cost estimates. In 2003, the Bush administration suppressed the agency's estimate that Medicare Part D would cost $500 billion to $600 billion over 10 years. The Bush administration was wrong to suppress the projection, but the projection itself turned out to be far too high"

This is extremely misleading, bordering on dishonest. The primary reasons the Part D estimates were too high were insurers successfully convincing people to use more generics, and far fewer new blockbuster drugs coming out. In other words, a couple of unexpected things happened that dramatically lowered costs. This was not because CMS was conservative in their estimates, it was because forecasts are always incorrect due to unforeseen occurrences, and this is true in both directions. The unforeseen occurrences could just have likely pushed costs higher rather than lower. To suggest that this means CMS is inherently conservative and we should take the under on their estimates is either very naive, disingenuous, or maybe both.

It is laughable that Ezra would imply he knows better than Medicare actuaries what the future costs will be, and that he thinks one case of them overestimating costs is reason to say they are too conservative.

Posted by: ab13 | April 23, 2010 1:15 PM | Report abuse

"whether it's Exxon making a killing when gas prices were through the roof due to speculation, or insurance companies making profits through rescission and other below-the-belt tactics, or the Wall Street shenanigans we've come to know and love"

-- Ya, got to hate that 3% profit margin. And do the Democrats not play with Wall Street at all? Is Obama going to give back that $900,000 he got from just one financial institution? Maybe donate it to his poor half-brother that is still living in a hut?


"making a profit *at the expense of customers*"
- Thats what Monopoly, Anti-Trust and other Lawsuits are for. Lets open those up to the top dogs that run everything. "Free Market" means everyone has a chance to "sell", not just the big dogs that get the laws and regulations written to help them over the small people.

And to everyone else, here is a 1% increase. 1% here, 1% there, pretty soon, you are at 5%. And who does this hurt the worse? The Middle Class! And do YOU get anything out of it? No, just more regulations and forcing people onto insurance. We need REAL REFORM, not just more regulation and forcing people onto a system that is corrupted.

Posted by: gjconely | April 23, 2010 1:16 PM | Report abuse

One thing I think is great here…during the healthcare debate, Republicans (and some posters here) acted as if all doctors were heartless profiteers who would all hang up their stethoscopes en masse when Healthcare reform passed because they couldn’t continue to make gobs of money. Our healthcare was going to collapse because of a dearth of physicians, who would all now go practice in some other country or quit altogether rather than subject themselves to the Democratic Plan to Socialize America.
Now (see Sue Lowden, GOP candidate to replace Harry Reid in Nevada, who suggested trading chickens for medical care) they suggest that, actually, doctors are all apparently super-altruistic saints who will perform triple bypasses and chemotherapy for a crock pot full of stew and some homemade pies.
It must be a nightmare to keep track of which outrageous lie you are promoting each day, especially when today’s lie is likely to be in direct conflict with yesterday’s.
Get your tap-dancing shoes all polished up (preferably by an immigrant) for the next dance, boys.

Posted by: DAMNEDGENTLEMEN | April 23, 2010 1:17 PM | Report abuse

One problem I have with this is the 1%, or whatever the number, is taken by force from some people and given to others. There are many other places that private individuals and companies could have spent this 1%, including developing new life-saving therapies. As a result, we've sliced the health insurance pie thinner, we've taken 1% of innovation out of the market, we've given up a freedom, and we've set a dangerous precedent.

Posted by: pcfan | April 23, 2010 1:24 PM | Report abuse


Oh good, ObamaCare is going to be right on budget just like Social-in-Security, Medicare, Medicaid, major defense systems, etc., etc., etc, ad nauseum, have been in the past. I was worried there for just a moment.

How’s the kool-aid carrying business today, Klein?

Posted by: sosueme1 | April 23, 2010 1:25 PM | Report abuse

The sign counts.

(+) cost is very, very different from the (-) cost you told us we were all dumb racists for disbelieving.

Now you accuse us of psychological issues for refusing to pretend we don't know the different between a + and - sign.

Posted by: gorak | April 23, 2010 1:28 PM | Report abuse

One problem I have with this is the 1%, or whatever the number, is taken by force from some people and given to others.
Posted by: pcfan
--------------
When will you Righties retire this tired pointlessness? It's called TAXES, dolt, and they've been "taken by force" for decades for all sorts of programs BENEFITING AMERICAN CITIZENS. Roads, power grids, fire and police and libraries and defense and...whatever.
If you didn't keep repeating easily defeated distortions, why, you wouldn't have anything to say at all, would you?

Posted by: DAMNEDGENTLEMEN | April 23, 2010 1:34 PM | Report abuse

"It's called TAXES, dolt, and they've been "taken by force" for decades for all sorts of programs BENEFITING AMERICAN CITIZENS. Roads, power grids, fire and police and libraries and defense and...whatever."

- What percentage of Taxes do the Lefties want to pay?

Posted by: gjconely | April 23, 2010 1:54 PM | Report abuse

I don't think I would want to be a DemocRat, if you lies to us!

Posted by: theaz | April 23, 2010 1:58 PM | Report abuse

This writer and many others have "bought" into the infamous Government budget "trick" of claiming Savings somewhere that will offset the true cost of some program. As a career Govt Cost Analyst, I used this "trick" myself. The beauty of some kind of claimed "savings" is that it can not be verified until history shows that it worked...The Govt by it nature cannot "save" anything. If savings could have been realized in some existed program..like Medicare, e.g...why weren't the savings ever important in the past?? why haven't any savings already been instituted?? There won't be any savings to offset the cost of this monstrosity of a bill !! we will ALL be paying for it for a long time via taxes, penalties, fees and other hidden deductions. Don't believe the "Savings" gimmick.

Posted by: Gypsy1 | April 23, 2010 2:00 PM | Report abuse

And how many doctors will be required to to serve 30 million new patients? And how many of them will take Medicaid/Medicare pay? Probably the ones who can see 100 patients a day. As some one said, insurance isn't access. I might add access isn't good healthcare.

Posted by: herb3 | April 23, 2010 2:31 PM | Report abuse

1% ... of what previous total, that covered what portion of healthcare or what portion of those covered or undocumented exactly? And, from when? The year before? The day before? nonspecifc percentages and statistics are so manipulative that using them prove a point is...pointless. Come back to the table with some hard numbers and dates so we can have a truly informed debate. But then, there would really be no debate. Cuz, you can't argue with facts, that's just submitting an opinion. Same as ____ - everyone's got one.

Posted by: LieToMe | April 23, 2010 2:38 PM | Report abuse

I'm sorry. Your call cannot go through. We were expecting some rational explaination for the $311 Billion dollar error. Reader Lomillator asked ME to explain less than that, so it's only fair for a lesser magnitude of error to be explained in detail.

Posted by: rmgregory | April 23, 2010 2:51 PM | Report abuse

There is no conflict with what the CBO says, only a conflict with the accounting tricks that were fed into the analysis by the Dems. There will be no deficit reduction and the cost of this will be at least 7 or 8 times its original estimate - Medicare, Medicaid, The Boston Dig, Amtrak, The Post Office - are all perfect examples.

I would also add the 1% increase in spending by 2019 does not quantify the deterioration in coverage to the rest of the country. The government has taken over 17% of the entire private sector to accommodate less than 10% of the population. We're changing the system for 270 million Americans that don't want this change. Clearly, this is the tail wagging the dog.

The health care bill is a monstrosity that will increase lawsuits, increase the deficit and lower the quality of care for all of America. This has been tried and tested in Europe and Canada and it has failed everywhere. Why on earth does anyone think our government will do it better.

For those of you that think we're being unsympathetic to the plight of the uninsured - you are wrong. The foundation of America is to provide equal opportunity for all. The government's role is to ensure the free market is working fairly. The health care industry is not working currently for all - but taking over the private sector will only put us deeper in debt and lower innovation, technology and health care for everyone.

If you like this bill so much - then maybe you don't understand what has made America so great.

Posted by: altonmj | April 23, 2010 2:55 PM | Report abuse

@altonmj: nobody likes this bill because it's original intentions were compromised to death. Single payer is what would work and save a bundle, since providers would not have to juggle all the different paperwork for all the different plans of all the different insurance companies.

Posted by: rjewett | April 23, 2010 3:12 PM | Report abuse

BigTunaTim,

maybe it is a lack of understanding but that understanding is lacking on the left side too. Recision while completely wrong (and now outlawed) was an absolute rarity but played up as often as liberals could do it for shock value. Don't get me wrong, when it happens once its once too much but that's like me assuming that all SEC agents are sitting around watching porn all day based upon the findings from the recent study. You can't make generalities like that and yet BOTH sides do.

When insurers can no longer (in 2014) deny coverage based upon pre-ex and they're meeting the 85% loss ratio and costs are still going up to unaffordable levels I just hope the anger finally gets directed at the responsible parties.

ab13,

its not that he's being deceptive it probably is that he just doesn't know. He doesn't see the inner workings and just sees the political side of the debate. He's likely never seen a hospital bill paid by insurance for a couple days stay that's $200k and thought, WOW I will NEVER pay enough premiums to make that up no matter how much costs go up.

That being said I'm wondering if the CBO and CMS have factored in a certain level of increased use of biologics. That's going to kill the costs IMO.

Posted by: visionbrkr | April 23, 2010 3:17 PM | Report abuse

Overall healthcare costs have been rising between 4% and 8% the last few years. The CBO said 50% of the increase was new technology, 25% was administrative and 25% was people using services w/o insurance. Now, we are reducing the growth to a 1% increase? The way I see it is that 2% to 4% is related to new technology - is that the first thing to go? Also, Ezra - you know that one of the assumptions for this report and the CBO report is that your Independent Advisory Board will reduce the cost growth from its current 6% to 8% down to 4% indefinately. That is why all of the spending goes down over the long run - they have fixed the major spending component at a constant without any reasoning other than "they will probably have great ideas that reduce costs."

Posted by: Holla26 | April 23, 2010 3:45 PM | Report abuse

1% is a LOT when your're talking about billions and trillions of dollars. Stop playing games.
Rational, experienced Americans (Tea Partiers) who've witnessed our government bureaucracy know better than to believe any of this.
Only 18-yr. olds who don't pay taxes will
swallow the Kool-aid.

Posted by: ohioan | April 23, 2010 4:15 PM | Report abuse

REMEMBER IN NOVEMBER…VOTE THEM OUT!!!

Ramming a healthcare bill the American people clearly did not want into law is certainly reason enough to REMEMBER IN NOVEMBER…VOTE THEM OUT!!!

However, we the American people must remember the PROCESS that was used to ram it into law against our will. To pass this law, the Congress and Administration had to use countless, secret back room deals that rewarded the constituents of one Congressmen to buy his vote while the rest of the American people paid for it. The Administration and Congress used every legislative trick they could find to ram this bill into law against the will of the American people. The American people demanded TRANSPARENCY and BI-PARTISANSHIP instead we got SECRECY and complete PARTISANSHIP. The PROCESS used to ram this bill into law is a complete affront to our system of government. The American people cannot stand by and let this Congress and this Administration destroy our system of government because they think the process does not matter. This abusive process should scare us all and that is why we must REMEMBER IN NOVEMBER…VOTE THEM OUT!!! The time has come to take our government back.

Congress and this Administration have put the country on a course of reckless government spending that has mortgaged the future of all Americans especially future generations. The only way to fix this long term structural problem is to create a pro-growth atmosphere for business. To do this we must reduce taxes NOW. How many different taxes does a business or individual pay on a regular basis? We must eliminate number and complexity of all these taxes and reduce the tax burden.

REMEMBER IN NOVEMBER…VOTE THEM OUT!!!

Posted by: AngryMobVoter | April 23, 2010 4:21 PM | Report abuse

"This has been tried and tested in Europe and Canada and it has failed everywhere."

Statements like these make it hard to take the speaker seriously. The health care systems in Canada and Europe (by the way, it doesn't make sense to lump all of Europe together as there are vastly different systems in different countries there) have obviously not "failed" in any useful sense of the word.

In light of World Health Organization data, it's downright silly to claim that we in the U.S. have the best health care system in the world. But then, most people making such a claim don't believe that America has anything at all to learn from anybody anywhere else in the world. The USA is always and everywhere simply "the best", no justification required.

Posted by: DAlpaugh | April 23, 2010 7:42 PM | Report abuse

Opponents of the health care reform legislation often cite the potential that cuts in payments to providers will not be activated by congress when the time comes. What they fail to mention is that these type of failures would have devastating effects even if only related to existing Medicare rules. Weakness of congress is not a good reason to avoid the actions that have been necessary for decades to reign in health care inflation. The cure is making congress strong, not abrogating responsibilities for the common good. The health reform opponents approach is like failing to send our children to school because in the past some students have failed classes in college.

Posted by: RockyRetired | April 23, 2010 8:43 PM | Report abuse

To paraphrase, a percent here, a percent there, pretty soon we are talking about real money. Or for the ubergeeks, from "The Other Brooks'" Mythical Man Month, who quotes Ovid - "Add little to little and there is a great pile." Thus does a bureaucracy grow.

Pity it does not follow the principle put forth by Antoine de Saint Exupéry - “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”

Posted by: perfgeek | April 23, 2010 10:18 PM | Report abuse

Star Wars is voweless Jedi Jude Judah establishment of the Elders Of Zion as masters of the universe by Luke the medical apostle. The civil service federal bureacracy Death Star is blowed up before socialized medicine could be established by a new Gonzo Gregory Harrison generation of cool kid hockey pucks. Jedi Jude Judah are said to be heridatary religious good guys the Chosen by the Light to help the good and harm the bad. Sith will help just about anybody allowing for Lando Kalrissian, Jabba the Hutt and the motley crew at the space bar to thrive. No aid and comfort to enemies foreign and domestic. Matriarchal mitochondrial mitochlorian DNA is rumored to hold the "God" gene if you believe Joo lies. Padme is jooess Natalie Portman and Princess Leah is daughter of Joo Eddie Fischer and Jooess Debby Reynolds. The Chosen are God's people and look down on the masses as monkeys and livestock to be managed or destroyed. AIDS HIV was synthesized and spread through hepatitus vaccine to gays and Africans by American medical. Great Satan.

Posted by: Uoughtano | April 24, 2010 10:08 AM | Report abuse

Read the Medicare actuary's report released yesterday. The reform bill will cost $311B more than was portrayed by the President and the Dem Congress. We have replaced one unsustainable system with another unsustainable system.

Posted by: SustainableHC | April 24, 2010 12:11 PM | Report abuse

Ezra Put down the Koolaid man. You cannot insure 35 Million people for free. Most intelligent Americans understand this so put away your Alinsky Handbook and stop spreading propaganda.

Posted by: dencal26 | April 24, 2010 2:57 PM | Report abuse

Once again I complement you for your awesome job of spinning the issue (bad news)! Now Ezra try to imagine a Republican in office & spin it the other way. I know you can do the same awesome job trumpeting the awful awful news it is for the Republican administration.

Posted by: ajguru | April 24, 2010 5:26 PM | Report abuse

Or you could look at it as insuring 34 million people at a cost of 35 TRILLION dollars over the next 10 years. That seems a tad expensive to me.

They could have just outright paid for their insurance for 1/10th of that amount, and not upended a system that was already covering 87% of the country, and could easily have covered 94% if the idiots had just had enough sense to get up off their butts and research already existing programs, instead of sitting around and playing the pitiful victim card.

Posted by: JolieFleur | April 24, 2010 7:25 PM | Report abuse

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