Isn’t All This Fighting Bad For One’s Health?

Ceci Connolly at WaPo:

After months of collaboration on President Obama’s attempt to overhaul the nation’s health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.

The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year’s health-care reform drama.

Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.

Jonathan Cohn at TNR:

That’s pretty damning stuff. And Ignani’s description of the report is absolutely correct, at least based on my reading of it.

But is the report itself correct? That’s not so clear.

The 26-page paper, which you can read here, examines how four key elements of health reform will affect private premiums. The four elements are the absence of a strong individual mandate, the excise tax on high-cost insurance plans, the chain reaction effect of Medicare cuts, and taxes on various sectors in the health care industry.

But this accounting leaves out some pretty big things, starting with the subsidies that would help people buy insurance. The report itself makes that clear, right up front on page E-6:

“The overall impact of these provisions will be to increase the cost of private health insurance coverage for individuals, families, and businesses.  The net impact of these increases on households would include the impact of these increases and the new subsidies provided under the bill.”

Now, the subsidies are not available to everybody, since they phase out with income and are only available through the insurance exchanges. As a result, people with higher incomes really would face higher premiums–if, again, the rest of the report is right. But there’s more fishiness here, most clearly in the section about the excise tax on high-value insurance plans.

Ed Morrissey:

This doesn’t surprise me in the least.  The Baucus plan is chock-full of fees and taxes, which Democrats keep insisting will punish those meanie insurance executives and doctors who steal tonsils and feet for big, big money.  As with all such penalties on producers, the costs get borne by the consumers.  Given the wide-randing taxes on medical devices and the “fees” Baucus envisions for an industry with an average profit margin of 3.3%. I’d actually guess that the $4,000/year increase may shoot a little low.

If we want to make health care more available and more affordable, we need to avoid imposing new costs on the industry and remove pricing opacity.  This isn’t brain surgery, another discipline for which this White House doesn’t have expertise.

Ezra Klein:

In the hallowed tradition of the tobacco and energy industries, the health insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek to reform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has something of a history with this sort of thing: In the early-’90s, the tobacco industry commissioned PWC to estimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by the Arthur Andersen Economic Consulting group, which concluded that “the cumulative effect of PW’s methods … is to produce patently unreliable results.” It’s perhaps no surprise that the patently unreliable results were all in the tobacco industry’s favor. He who pays the piper names the tune, and all that.

All that makes it a bit hard to respond to this analysis. Seriously engaging with its methodology probably gives it more credit than it deserves, making this seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totally ignoring its claims means some of them might live unchallenged. So rather than a full tour through the “analysis,” here are a couple of its more representative moments.

A footnote — how come the good stuff is always in the footnotes? — on page E-2 of the report sort of gives away the game. It reads: “Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes.” That’s written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.

Ernest Istook at Heritage Foundation:

The PWC projections track what The Heritage Foundation and many others have said about the legislation: It does not save money. It simply taxes those who have health coverage and uses the money to give care to others.

The White House is said to be livid. After all, President Obama’s claims that he makes care more affordable are exposed as a myth by the new study. Lawmakers claim the bill would “save” money, but that’s not true for those who have insurance. The only “savings” would be to those who receive government-paid health care and subsidies at the cost of higher prices for everyone else. (Even if the legislation “reduced the deficit”, it would do so by making citizens pay more, not by controlling government spending.)

Despite the enormous costs, estimates say 25-million people would remain uninsured under the Baucus bill. The new study also criticizes the Baucus plan for not placing tougher mandates and penalties on those who do not buy health insurance, which would help spread the costs (and create new customers for insurers). PWC reports higher costs would occur due to these parts of the bill:

  • Requirements to cover pre-existing conditions with guaranteed-issue insurance
  • The new tax created on so-called “high cost” health care plans
  • The new taxes on medical devices and other segments of health care
  • Reduction in Medicare payments, which care providers would offset by raising rates on their other patients.

The report will be denounced as a political attack by the insurance industry. But the real attack is Washington’s assault on our pocketbooks and our freedoms.

Kevin Drum:

I have my doubts that AHIP is really all that dedicated to cost controls.  What’s more, they did get a sweetheart deal of their own: in return for agreeing to various regulations on preexisting conditions, out-of-pocket caps, and so forth, they got a promise to include an individual mandate in the bill.  That mandate means more people will buy insurance and it’s worth billion of dollars to the industry.

However, the Baucus bill has weakened that mandate.  So the problem may be not that they didn’t get a sweetheart deal, but that they’re afraid the deal is being watered down too much.  There’s even a decent case to be made that they’re right (i.e., that the individual mandate really ought to be stronger than it is in Baucus’s markup).  I wouldn’t be surprised if this report has been on the shelf for a while, with AHIP plugging in the final numbers and releasing it now as a way of warning congressional negotiators that full-scale war is coming unless their bribes are restored to the full level they thought they were getting in the first place.  If that’s the plan, though, it might be backfiring.  Here’s Carrie Budoff Brown at Politico:

This might be the first rift unfolding in public between an industry player and the White House and Senate Finance Chairman Max Baucus (D-Mont.)….Senate Finance Committee spokesman Scott Mulhauser called it “a health insurance company hatchet job, plain and simple.”

“This report is untrue, disingenuous and bought and paid for by the same health insurance companies that have been gouging too many consumers for too long as they stand in the way of reform yet again,” Mulhauser said in an emailed statement. “Now that health care reform grows ever closer, these health insurers are breaking out the same, tired playbook of deception to prevent millions of Americans from getting the affordable, accessible care they need.”

Stay tuned.  AHIP seems to have pissed off quite a few people with this piece of gamesmanship.  We’ll know shortly which side will pay a price for this.

Yuval Levin at The Corner:

The fundamental problem at the core of our health-care dilemmas is the cost of coverage. That’s the reason that the uninsured are uninsured; it’s the reason the employer-based coverage system is collapsing; it’s the reason our health-care entitlements are unsustainable. Everything else is a symptom: the exploding cost of coverage is the underlying problem. The approach the Democrats are now pursuing would make it worse, and, this study suggests, would cost the average family an additional $20,000 in insurance premiums over ten years.

UPDATE: Keith Hennessey

Megan McArdle

Reihan Salam

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