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The health-care reform bill's empty promises, and their curious fullness

The Democrats, Megan McArdle says, "misled themselves on the effects of Obamacare -- both political and economic." As evidence, she points to this column by Peter Suderman. I clicked over with great interest. Were the Democrats really misleading themselves? Why would they want to do that? What would be in it for them?

But Suderman's column mostly seems to be misleading his readers. It lists "seven empty promises about ObamaCare" -- but on even cursory examination, few of them are empty at all.

Take No. 3. Suderman says that the "around $900 billion" cost projection was off, because "the CBO later estimated that the law will actually require about $115 billion in additional discretionary spending." But that's just wrong. The discretionary spending is not an estimate of new spending required by the bill. As Doug Elmendorf said, "CBO’s discretionary baseline, which assumes that 2010 appropriations are extended with adjustments for anticipated inflation, already accounts for much of the potential discretionary spending under PPACA." Of the $115 billion, $86 billion was already in the original estimate. What's left is optional spending that Congress may or may not vote to appropriate in the future.

Or look at No. 7. Suderman calls out the administration for saying the bill "will bring down the price of insurance." In reality, he says, "CBO predicted that the law will cause average health insurance premium prices to rise by 10-13 percent in the individual market." That's not right, either.

We'll start at the beginning: CBO reported that costs in the employer markets, which serve 150 million, would go down slightly. So already, the bill brings down the price of insurance for most people. But Suderman, despite the expansive headline, is only talking about the individual market. He doesn't even mention the employer market findings.

The individual market serves 30 million people. And what the CBO found there is that the price of a given insurance plan would go down, but because of the subsidies, the price of the insurance plans that people will choose to buy will go up. Think of it this way: If I put everything in my TV store on sale, and you then walk in and win $1,000 for being my 1,000th customer, you might buy a more expensive TV than you would have otherwise. But the TVs in my store will still be cheaper than they were before.

I also can't get with No. 2: Suderman is annoyed that the administration double-counts certain savings in its rhetoric, and he's right that a single dollar can't both lower the deficit and strengthen Medicare. But that doesn't mean the bill doesn't put Medicare on better fiscal footing, which is how he sells it. Passing the Independent Payment Advisory Board is the single most aggressive move we've ever made to control
Medicare's costs going forward. If it takes effect -- and it will unless the law is changed -- it will undoubtedly put Medicare on better fiscal footing, and no one, to my knowledge, has argued otherwise. They argue, instead, that it won't take effect. But that's an argument against letting Republicans overturn it, not against its efficacy. In any case, Suderman doesn't mention any of the bill's actual policy steps here.

And so it goes. Suderman's fifth point seems to suggest that we're not spending money on the tax exclusion for employer-provided health insurance. Most analysts put that tax break at about $250 billion a year, and the excise tax begins to pare it back. In effect, that's taking money from a federal subsidy for employer-provided insurance and putting it into health-care reform and deficit reduction, just the same that cutting Medicare Advantage reimbursements shifts money from subsidizing private insurance in Medicare and puts it towards health-care reform.

I can think of a lot of arguments against the health-care reform bill. One is that it should go further in dismantling the employer-based system. Another is that it should move us toward a single-payer system, akin to the one that saves so much money for Canada. Another is that it shouldn't force people to buy insurance, and still another is that there should be a public option, and I can go on. But the idea that the administration and the people who supported this bill just convinced themselves of a lot of untrue things and everything they said was a lie just doesn't make a lot of sense.

Conversely, what you see in Suderman's piece is that the plan's critics have convinced themselves of a very big untrue thing: Most everything in the bill is bad, wrong, and maybe even venal. And so rather than saying the administration double-counts some of its Medicare savings in its public statements, he says it does nothing for Medicare, not even bothering to rebut the expected impact of IPAB, experiments in bundling payments, the innovation center, or any of the other concrete reforms that, unlike rhetorical overreach, actually do change the program's fiscal stability. Rather than say that CBO projects the bill will slightly reduce the cost of most health insurance, with larger effects in the individual market that will be canceled out through a combination of subsidies and mandates that will encourage people to purchase pricier plans, he just says it's a lie that the bill will bring down premiums at all.

One of the differences between the bill's supporters and critics comes in that mix of appreciation and opposition to the bill's features and tradeoffs. Most of the people who support the bill are something like 70:30 for the bill -- it makes things better, but there's a lot in there they'd like to be different. The bill's opponents speak as if they're closer to 100% against the bill: Everything is bad, it'll destroy American health care, none of the cost controls will work, all the promises are lies, etc, etc. It's one reason I've always found the bill's supporters so much more convincing than its critics.

By Ezra Klein  |  September 10, 2010; 3:03 PM ET
Categories:  Health Reform  
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Next: A better way to test deficit credentials

Comments

Excellent article, Ezra. Posts like this are what makes this blog invaluable.

Posted by: beet | September 10, 2010 3:12 PM | Report abuse

Well if Megan isn't there to link to hubby's poorly-researched screeds, who else will? Isn't it strange that Megan's errors always tend to support her argument? Looks like hubby has picked up the same habit.

Posted by: jjhare | September 10, 2010 3:12 PM | Report abuse

Agree with the first comment.

Posted by: tuber | September 10, 2010 3:31 PM | Report abuse

Megan's posts need to be labeled "warning check other sources after reading for facts".

Posted by: vintagejulie | September 10, 2010 3:46 PM | Report abuse

--"If I put everything in my TV store on sale, and you then walk in and win $1,000 for being my 1,000th customer, you might buy a more expensive TV than you would have otherwise. But the TVs in my store will still be cheaper than they were before."--

Is Klein saying that one in one thousand people will be winning the government's health care subsidy? Isn't the number already something like fifty percent, reflecting the approximately fifty percent share of the health care market bloated with government (stolen) dollars?

So, where do all the $1000 prizes in Klein's stupid TV store example come from? Does Klein have to go down the street to rob WalMart every day, or what?

That's the double talk ol' propagandist Klein is shoveling today.

Health insurance premiums might trend cheaper on one end (though they aren't trending down, yet, by a long shot, and I doubt they do in the foreseeable future) but the overall suck to the economy on matters health related is going to be greater and greater and greater. And that's the fact that Klein practices his little pirouettes around.

Posted by: msoja | September 10, 2010 3:53 PM | Report abuse

So when is the Ezra Klein vs. McSuderman household HCR implementation debate on bloggingheads? I've been waiting for it for months now.

Posted by: tmorgan2 | September 10, 2010 3:54 PM | Report abuse

Whaaaa? McArdle promotes crap and lies? There's something new and different!

Posted by: AZProgressive | September 10, 2010 3:56 PM | Report abuse

"Were the Democrats really misleading themselves? Why would they want to do that?" Because universal health care has been a Democratic priority for decades. The Democrats in congress voted on a piece of legislation that they did not read and that they did not understand on the promise from the Obama administration and the Journolist wonks that it would give everyone health insurance, reduce the deficit, and control health care costs. Of course they misled themselves. They desperately wanted to believe they they were doing something good for America.

Raising the minimum wage was a similar exercise in misleading themselves. The Democrats all patted themselves on the back thinking that they helped the poor people with minimum wage jobs. Unfortunately the unintended consequence is that unemployment for those same poor people is at record levels because employers can no longer afford to hire them. Just like with health care, the legislation screws over the very people it was meant to help. And they say Democrats are the smart ones.

Posted by: cummije5 | September 10, 2010 4:30 PM | Report abuse

It's more like you make it illegal to sell anything but the 62' plasma, knock a couple of bucks off the price and then tell everyone TVs are now cheaper.

Posted by: MrDo64 | September 10, 2010 4:34 PM | Report abuse

Contra Ezra and Suderman, it is completely possible for the same savings to both strengthen Medicare and reduce the deficit. Medicare costs are included in the unified budget, and are thus part of the projected deficit. To the extent that the health care bill reduces those costs, it strengthens medicare (reduces the amount of general fund $ required to meet Medicare's commitments) and reduces the deficit.

Posted by: DieselKitty | September 10, 2010 5:18 PM | Report abuse

Suggesting again that the CBO analysis of Obamacare represents any conceivable reality simply shows that Ezra Klein has lost touch with reality.

Everyone – especially those inside the Beltway – understand the the “non-partisan” CBO is prohibited from making any realistic assumptions about legislation that is presented to it. By law, CBO must evaluate any proposals based upon what is contained within “the four corners” of such proposals, no matter how unrealistic or far-fetched they may be.

It is truly astounding that the Washington Post continues to publish such drivel.

Posted by: glenalxndr | September 10, 2010 5:56 PM | Report abuse

--"To the extent that the health care bill reduces those costs, it strengthens medicare (reduces the amount of general fund $ required to meet Medicare's commitments) and reduces the deficit."--

It's like mafia accounting. "We made a profit this year, Godfather, but we had to break forty percent more legs to do it."

The better government numbers come out of the back pockets of the earnest citizenry, where making ends meet will be harder than ever.

Posted by: msoja | September 10, 2010 6:52 PM | Report abuse

I've tried to follow Meagan's posts for a while now, but I've come to the conclusions that she's a complete hack. She's got a poor understanding of economics, and tends to project her biased onto whatever she sees, grasping at whatever poorly formulated sources that reinforce her false beliefs. How she keeps her job is beyond me.

Posted by: SnowleopardNZ | September 11, 2010 4:06 AM | Report abuse

"They argue, instead, that it won't take effect. But that's an argument against letting Republicans overturn it, not against its efficacy."

Yet McMegan cites this as support for 'chastening' the Dems by kicking them out of office. Brilliant.

Posted by: rt42 | September 11, 2010 6:16 AM | Report abuse

I've quit giving ms. mcardle any credibility long ago - her writings are typically error filled and sophomoric and not worth the time. I've come to wonder if she even understands the issues that she writes about.

Well done ezra.

Posted by: JilliB | September 11, 2010 7:28 AM | Report abuse

Health care savings are going to become Obama's WMD. We are going to search high and low for them but they will remain elusive. Obama may actually believe that these savings exist, just as Bush may have believed that the WMD existed. Either way the country will have been pulled into a huge expensive endeavor that we will have difficulty getting out of.

Posted by: dflinchum | September 11, 2010 7:52 AM | Report abuse

Mr. Klein states: "But Suderman, despite the expansive headline, is only talking about the individual market. He doesn't even mention the employer market findings."

My small business just got our renewal rates. No changes to coverage or employees, but the increase is 14%. We've always paid the majority of the premium for our employees, but now the government is going to mandate it or penalize us? Maryland already mandated a 733% increase this year for the unemployment fund (although we have had no claims filed against us in more than 10 years). New PCI compliance laws cost us $500 for software, and quite a number of man hours to figure out what was required.

But, back to health care; I know numberous people who are in their 50s and have been out of work for more than one year. Nobody will hire them because their age will increase the premiums for the rest of the employees. Even though you are not allowed to discriminate for age, employers have to think of the health care cost factor when they hire someone.

Posted by: worryd | September 11, 2010 8:19 AM | Report abuse

The biggest lie was from Obie. He claimed it LOWER premium costs for Americans. It has RAISED them.

Bottom line? November elections.

Posted by: illogicbuster | September 11, 2010 9:19 AM | Report abuse

"The individual market serves 30 million people. And what the CBO found there is that the price of a given insurance plan would go down, but because of the subsidies, the price of the insurance plans that people will choose to buy will go up. Think of it this way: If I put everything in my TV store on sale, and you then walk in and win $1,000 for being my 1,000th customer, you might buy a more expensive TV than you would have otherwise. But the TVs in my store will still be cheaper than they were before."

I can follow all of this, but on the other hand total TV spending increases, doesn't it?

Furthermore, this is a double dose of cost insulation.

Not only does health insurance hide the true cost of services, driving up total expenditure, but the subsidies hide the true cost of health insurance, leading to even more cost insulation than would otherwise be the case.

This is what leads to absurdities such as "more doctors lead to higher costs" which are then used to declare the market a failure.

Why not just give people enough money to pay for a whole batch of their own health care? Say $225,000 for each citizen. Funds can be spent on any person in one's immediate family (parents, spouse, children). That gives a family of four $900,000 of resources available to pay for health care. Additional resources can be provided by saving and insurance. At death, half of the remaining amount in an account passes to the government, and the other half to a designated beneficiary's account.

At the same time, eliminate Medicare, Medicaid, SCHIP, and the tax subsidy for employer insurance.

Posted by: justin84 | September 11, 2010 11:21 AM | Report abuse

That's downright diabolical, justin84.

I like it.

Posted by: bgmma50 | September 11, 2010 11:42 PM | Report abuse

"But Suderman's column mostly seems to be misleading his readers."

And Megan McArdle is one of those so easily misled? Or is she simply dishonest? Really, Ezra, what conclusions shall we draw from this about McMegan?

I see that you once again avoid taking up this subject. And I still remember that long ago you even deleted one of my comments when I phrased my opinion on McArdle in no uncertain terms. Which led me to believe you have a crush on her. You still do?

Posted by: Gray62 | September 12, 2010 5:14 AM | Report abuse

The costs of health care soar when prices and information aren't transparent. Check out the explanations at http://www.whatstherealcost.org/info-desk.php?category=o.ut-of-control-costs

Posted by: ChristineaWithRegence | September 12, 2010 1:50 PM | Report abuse

"I know numberous[sic] people who are in their 50s and have been out of work for more than one year. Nobody will hire them because their age will increase the premiums for the rest of the employees... employers have to think of the health care cost factor when they hire someone."

This is why a system of employer based insurance is dumb. Tying the insurance market to employment status is fraught with problems. Expanding Medicare or creating a true universal coverage system escapes this problem, but unfortunately, for any reform to happen, one party absolutely insisted that the US remain a employer-based system and would not consider any alternatives.

Posted by: Nylund154 | September 12, 2010 2:16 PM | Report abuse

Oh and I call BS on blaming the health care act for rising premiums.
Ours went up last fall, well before anything was passed, by 40%.
That's right 40%...we had to lower our coverage just to be able to afford any insurance.

So if all your insurance costs have gone up by is 14%, be happy.

Posted by: vintagejulie | September 12, 2010 2:39 PM | Report abuse

I just call it HC "deform" and go from there...sad Democrat leaning Independent!

Posted by: jsonderm | September 12, 2010 5:14 PM | Report abuse

Ezra, I'm so glad to hear that our company's heath insurance premiums are going to go down because of Obama care. If you wouldn't mind, could you please let my insurance carrier know, because they just jacked our premiums up 18%. We even got a few other insurance companies in to quote us, trying to get the price down. No deal - they came in even higher. We talked to a few other small business owners we know that also provide health insurance for their employees. They have the same tale of woe. In the real world, not the one you inhabit, premiums are not going down. Ever.

Posted by: lopence | September 12, 2010 11:18 PM | Report abuse

"they just jacked our premiums up 18%"
Well, of course the insurers have to push up the premiums now, so that they can reduce them when the reform goes into effect! If they wouldn't do that, they would get into dire straits: They would have to cut their profits instead of their customer's benefits! And that can't be allowed ot happen. It would be the end of the world!
|-(

Posted by: Gray62 | September 13, 2010 8:10 AM | Report abuse

As always, Ezra Klein does his homework, deals his cards with intelligence and balance, and has the courage to call out those who elect to misinform. Thank you!

Posted by: pbkritek | September 13, 2010 8:42 AM | Report abuse

Ezara, tell me can you even turn your head to the right? When you drive do you make any right turns, or do you continuously go left until you finally feel that you accomplished something. When you fly do you have to sit on the left wing?
Your "editorials" are nothing more than left wing spin and propoganda...

Posted by: brooklynborn1 | September 13, 2010 10:58 AM | Report abuse

Why is the Atlantic so committed to being an international laughingstock in matters economic. When I read McMegan's articles I laugh at how amazingly, willfully wrong she is. When I remember that she's a mainstream media "expert" on some of the most pressing issues of the day, I stop laughing.

Posted by: Bullsmith1 | September 13, 2010 1:43 PM | Report abuse

Sorry to rain on the parade

As you said - check the facts

from http://thehill.com/images/stories/whitepapers/pdf/oact%20memorandum%20on%20financial%20impact%20of%20ppaca%20as%20enacted.pdf

and

http://thehill.com/homenews/administration/93947-govt-report-new-health-law-could-lead-to-higher-prices-employers-dropping-coverage-

"A new government report from Rick Foster, the chief actuary of the Centers for Medicare and Medicaid Services (CMS), finds that President Barack Obama's new healthcare reform law would cost $828 billion over the next decade while saving $577 billion."

re employer health care
"The report also suggests that some employers will stop offering their employees healthcare coverage benefits: "A number of workers who currently have employer coverage would likely become enrolled in the expanded Medicaid program or receive subsidized coverage through the [Health] Exchanges. For example, some smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their -- and their employees' -- advantage to end their plans..."

Foster claims that the law's penalties on employers who don't offer their workers health insurance "are relatively low compared to prevailing health insurance costs." "

now - simple logic - if more employers drop coverage, the number buying individual coverage goes up

AND

the cost of not having coverage is an additional tax with 0 benefit, so that is an additional cost as well

Posted by: JohnSpek | September 13, 2010 3:38 PM | Report abuse

One other factor -

this bill is similar in scope and intent as what MA did 4 year plus ago

190,640 children in MA are being reported as not insured

see http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2010.0747

Posted by: JohnSpek | September 13, 2010 3:59 PM | Report abuse

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