- No independent group has taken a comprehensive look at how the legislation would impact premiums for the 170 million Americans who receive insurance through their employers. Photo: AP
But that was then.
No one in the White House is making such a pledge now.
It’s one of the most basic, kitchen-table questions of the entire reform debate: Would the sweeping $900 billion overhaul actually lower spiraling insurance premiums for everyone?
No one really knows.
And in fact, for all the ink spilled on the effects of health care reform, no independent group has taken a comprehensive look at how the legislation would impact premiums for the 170 million Americans who receive insurance through their employers – a population that would receive little direct financial assistance under the various congressional proposals.
For small businesses and individuals who purchase their own plans, economists remain sharply divided over the impact on premiums.
“This town continues to miss what is going to be the real issue,” Sen. Ron Wyden (D-Ore.) said. “The real lodestar, the thing people are focusing on at home, is all premiums, premiums, premiums. All you have right now is what the insurance industry has said.”
At a recent Senate health committee hearing, two health care rivals – Douglas Holtz-Eakin, an economic adviser to Sen. John McCain’s presidential campaign, and Jonathan Gruber, an economics professor whose work is cited often by the White House – agreed comprehensive, objective evidence wasn’t available for small and large businesses.
“It’s insane,” Holtz-Eakin said.
The lack of data prompted Sen. Evan Bayh (D-Ind.) to request a broad analysis from the nonpartisan Congressional Budget Office on premiums, which he said was “a basic, bottom-line question that we have to have answered before we can decide if this is an intelligent thing to do.”
Aides expect to see the report ahead the Senate floor debate on health care, which is causing anxiety among Democrats because of the uncertainty of what the famously cost-conservative CBO will produce. The possibility that congressional scorekeepers will conclude that premiums won't flatten out or decrease would make centrists even more leery of reform, forcing adjustments to the bill just as Senate Majority Leader Harry Reid (D-Nev.) is already scrambling to meet a Christmas deadline.
Obama was the one who raised expectations of lower premiums. From one city to the next, and during the presidential debates, Obama made the pledge almost as often as he vowed to remove troops from Iraq: “We estimate we can cut the average family’s premium by about $2,500 per year.”
He has barely uttered it since taking office. The last recorded mention by Obama was in May, when he announced that six health industry groups agreed to lower the growth rate in health care spending by $2 trillion over 10 years, resulting in a savings of $2,500 per family “in the coming years.”
Campaign advisers sought to make Obama’s plan tangible to voters. But the $2,500 estimate was controversial, even among progressive health care economists. First, the figure represented not simply a family’s share of premiums, but also savings that would accrue for employers, Medicare and Medicaid. Second, experts did not expect the savings to materialize for many years.
David Cutler, a Harvard University economist who helped develop the estimate for the Obama campaign, said the savings are still achievable, but perhaps not for a decade. It depends almost entirely on whether Congress is strict about reducing the growth rate of health care spending in Medicare and Medicaid – and the private sector follows the government’s lead in wringing inefficiencies and waste out of the system.
“Far and away, what happens to premiums is dependent on whether you can bend the cost curve,” Cutler said.
And there are questions as to whether the bills even meet that goal.
Gruber, the favorite economist of the White House, said the bill “really doesn’t bend the cost curve.”
“But I think this bill starts us down the road to the point where we can do that,” Gruber said. “The alternative is doing nothing. Relative to doing nothing, I think we are a lot closer to bending the curve.”
Reminded that Obama demanded a bill that lowers health care spending, Gruber said: “That is what he would like to do. But he’s not doing it.”
In the health reform debate, Democrats face a public-relations challenge similar to the $787 billion economic stimulus package. In the face of rising unemployment, Obama has defended the stimulus as preventing even worse job losses than the country is now experiencing.
Similarly, progressive health policy experts say it will be so hard to reduce the cost of health insurance, they’d be thrilled if they could simply slow down the rapid rise in premiums.
If premiums are the benchmark by which reform is judged, “we are setting ourselves up to fail,” Gruber said. “Premiums will still go up, but they will go up less than they would” without the overhaul.
People who currently purchase insurance on the expensive individual market are most likely to see lower premiums, Gruber said. Small businesses could also see more manageable premiums, he said, because they would shop for plans in an exchange, which would offer the kind of bargaining power now available only to large employers. But those savings would vary widely based on the health of the firm's workers, he added.
"Older, sicker, small firms will clearly win" since they pay the highest premiums under the current system, Gruber said. "Probably the healthy firms will lose a little bit. ... The truth is I don’t think there will be a huge swing either way."
Nancy-Ann DeParle, director of the White House Office of Health Reform, said the congressional scorekeepers came up with “pretty compelling results” that there will be savings for small businesses and people who purchase their own insurance. As for large employers, “we have every reason to believe there will be savings there,” she said.
“I think you could always use more data,” DeParle said, but added that “we have plenty of data on where things are and where things are headed without reform.”
Obama has said he wants a bill that does not add to the deficit over the first decade, and launches programs that reduce health care spending through the second 10 years of the overhaul. A set of Medicare pilot projects aim to change the way medicine is practiced by rewarding or penalizing health care providers based on outcomes. An independent Medicare cost commission would make judgments on how to make the program more efficient.
Over the long term, Democrats hope investments in health information technology, prevention and wellness programs, and administrative savings would reduce overall health care spending and lower premiums.
Critics of the Democratic approach say other elements of the bill would do more to jack up premiums.
It would take years to implement the cost savings, but billions in new taxes would be levied immediately on insurers, device manufacturers, and drug makers, which the CBO and the Joint Committee on Taxation has said would be passed onto consumers. In the absence of an enforceable mandate on individuals to purchase coverage, various market reforms would also cause a spike in costs, Holtz-Eakin said.
“The only question is how big this problem will be,” Holtz-Eakin said.
The issue has steadily crept to the forefront of the debate since the insurance industry released three reports over the last month warning about higher premiums. Democrats largely dismissed the analyses because of the source. But Republicans have seized upon the issue, making it central to their argument against the Democratic bills.
House Republicans released a bill last week that aimed to create a contrast with Democrats on that very point – and the CBO boosted the GOP case by saying their legislation would lower premiums, but leave 52 million people without coverage in 2019.
Lawmakers say they are hungry for data that assures them they are not voting for a bill that does the opposite what they have intended.
“I want to see an objective, third-party analysis from people who don’t have a conflict of interest,” said Sen. Kent Conrad (D-N.D.). “I like evidence.”
Reminded that Obama demanded a bill that lowers health care spending, Gruber said: “That is what he would like to do. But he’s not doing it.”
In the health reform debate, Democrats face a public-relations challenge similar to the $787 billion economic stimulus package. In the face of rising unemployment, Obama has defended the stimulus as preventing even worse job losses than the country is now experiencing.
Similarly, progressive health policy experts say it will be so hard to reduce the cost of health insurance, they’d be thrilled if they could simply slow down the rapid rise in premiums.
If premiums are the benchmark by which reform is judged, “we are setting ourselves up to fail,” Gruber said. “Premiums will still go up, but they will go up less than they would” without the overhaul.
People who currently purchase insurance on the expensive individual market are most likely to see lower premiums, Gruber said. Small businesses could also see more manageable premiums, he said, because they would shop for plans in an exchange, which would offer the kind of bargaining power now available only to large employers. But those savings would vary widely based on the health of the firm's workers, he added.
"Older, sicker, small firms will clearly win" since they pay the highest premiums under the current system, Gruber said. "Probably the healthy firms will lose a little bit. ... The truth is I don’t think there will be a huge swing either way."
Nancy-Ann DeParle, director of the White House Office of Health Reform, said the congressional scorekeepers came up with “pretty compelling results” that there will be savings for small businesses and people who purchase their own insurance. As for large employers, “we have every reason to believe there will be savings there,” she said.
“I think you could always use more data,” DeParle said, but added that “we have plenty of data on where things are and where things are headed without reform.”
Obama has said he wants a bill that does not add to the deficit over the first decade, and launches programs that reduce health care spending through the second 10 years of the overhaul. A set of Medicare pilot projects aim to change the way medicine is practiced by rewarding or penalizing health care providers based on outcomes. An independent Medicare cost commission would make judgments on how to make the program more efficient.
Over the long term, Democrats hope investments in health information technology, prevention and wellness programs, and administrative savings would reduce overall health care spending and lower premiums.
Critics of the Democratic approach say other elements of the bill would do more to jack up premiums.
It would take years to implement the cost savings, but billions in new taxes would be levied immediately on insurers, device manufacturers, and drug makers, which the CBO and the Joint Committee on Taxation has said would be passed onto consumers. In the absence of an enforceable mandate on individuals to purchase coverage, various market reforms would also cause a spike in costs, Holtz-Eakin said.
“The only question is how big this problem will be,” Holtz-Eakin said.
The issue has steadily crept to the forefront of the debate since the insurance industry released three reports over the last month warning about higher premiums. Democrats largely dismissed the analyses because of the source. But Republicans have seized upon the issue, making it central to their argument against the Democratic bills.
House Republicans released a bill last week that aimed to create a contrast with Democrats on that very point – and the CBO boosted the GOP case by saying their legislation would lower premiums, but leave 52 million people without coverage in 2019.
Lawmakers say they are hungry for data that assures them they are not voting for a bill that does the opposite what they have intended.
“I want to see an objective, third-party analysis from people who don’t have a conflict of interest,” said Sen. Kent Conrad (D-N.D.). “I like evidence.”
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