America's Health Insurance Plans has been circulating a new study that claims the Senate Finance Committee's health reform bill will raise costs over time--more so than under current law--and Democrats are not happy about it. The White House and the Finance Committee's Democratic office have accused it of skewed results for dishonest, political purposes.
"This is the type of self-serving and shoddy analysis you get from industry sponsored research," Office of Management and Budget spokesman Kenneth Baer said, echoing the White House message.
The study, conducted by PricewaterhouseCoopers, claims that single insurance coverage would be $1,500 more expensive on average in 2019 than under the current plan ($9,700 vs. $8,200), while family insurance coverage would cost $4,000 more ($25,900 vs. $21,900).
But it doesn't actually look at the whole bill, and this is part of what the administration is displeased with. As stated in the study, it only looks at four provisions of the Baucus bill, namely:
- Insurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement."They ignore tons of different key points of the policy," a White House official said. Among them: subsidies for people who need help buying insurance.
- An excise tax on employer-sponsored high value health plans (or "Cadillac plans") that in a few years could also raise premiums for some moderate value plans.
- Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers. These changes are expected to more than offset the potential reduction in cost shifting resulting from providing coverage to the uninsured.
- New taxes on health sector entities that are likely to be passed through to consumers.
Ezra Klein calls it deceptive, and Jonathan Cohn points out some things PricewaterhouseCoopers missed at The New Republic; he decides the insurance companies have a point in raising a ruckus about the Baucus bill, but that it's hard to say whether the new study should be taken at its word.
But at this point, Democrats clearly are not big fans.
Look at footnote 4 on page E2 of the report. That's a pretty big assumption - one that pretty much invalidates the report's findings - don't you think, Chris?
Good Catch Pineview,
See, Chris Good is a Marc Ambinder journalist. You can contrast a Marc Ambinder Journalist, from, ya know, real journalists.
A Marc Ambinder Journalist ("MAJ") = John Hartwood, Anne Kornblut, and/or most of the Washington Beltway.
A Real Journalist ("RJ") = Matt Taibbi, Seymour Hirsch, Greg Sargent, Dave Weigel, et al.
A key difference between a Marc Ambinder Journalist and a Real Journalist is that, a Real Journalist is concerned with uncovering the objective truth, whereas a MAJ is concerned with "ascertaining and elevating the view points of the two conflicting sides," and how the
"contreversy" will effect the "process." The objective truth is not an interest of the Marc Ambinder Journalist, as Pineview was so kind to point out.
Because an objective real journalist would've noted that the favorable to the health insurance industry conclusions of a report commissioned [literally] by the health insurance industry, which omits certain necessary variables (like ignoring how new taxes and subsidies will effect behavior), and thus renders the whole report unreliable, and as such shouldn't be regarded as a bona-fide report.
But instead, we have more Marc Ambinder Journalism, where we just report what each side says, "[democrats say the report] skewed results for dishonest, [and] political purposes." Well what should I believe Chris Good?!? The Democrats or the AHIP?!?! Please, you're the journalist, enlighten me!
Nope, they don't care. It's all he said, she said, and who cares how badly we misinform the public. F-ck the truth, we want page views!
Let's get another report from the Lewin group while we're at it.
Pineview1997: I'm curious as to which aspect of that footnote you think is an invalid assumption. "Full pass-through of new industry taxes" -- this is consistent with how most industries react to taxes, and I think it would be difficult to design a new tax in such a way that it wouldn't ultimately be borne by consumers. "Full cost-shifting of cuts to public programs" -- when public payment levels to providers are cut, it is logical for providers to react by raising the rates they charge to private payers in order to acheive a neutral impact on their own revenues, and it seems completely reasonable to assume that this phenomenon would continue going forward.
Hey rbb,
Let's take the first part of the footnote: "Impact assumes payment of tax on high-value plans." Economists, and even some reasonable people, believe that taxes on high value plans would lead both employers and consumers toward more affordable plans that would do more to control costs. That seems right, right? In fact, even PWC believes that - later in the report they say "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed." So although they believe that these taxes would change behavior, they don't build the change of that behavior into their estimate. That's bad consulting and worse economics. It's like saying if the deli around the corner from your office decided to raise their prices 100% everyone would just continue to go there rather than packing a lunch or trying someplace else.
The second dubious assumption built into their model, "full cost-shifting of cuts to public programs," seems to assume that there is some constant pool health care spending that operates in a zero-sum manner. It appears to assume for example that if one plan decides to cut reimbursements to its hospitals that another plan has to up its reimbursements. That's nuts. If the Walmart down the street is able to lower the price of shoes in its store because it renegotiated it's contract with the supplier in China, it does not mean that Target has to raise its prices on those same shoes.
What's really going on here is that the insurance company is beginning to get scared - since early September when it appeared that the Dems were going to pass something, the big insurance companies lost about $10BB in market capitalization (even in an up market). This report is a pure scare tactic - and a sloppily transparent one at that.
Oh come on... somebody really expects that health care cost will go down once Obama and the Democrats are though with it?
Children never learn. That's why they stay inside and wear pajamas.
Pineview1997:
Remember that someone's health care "spending" represents someone else's health care "income". If Medicare cuts reimbursements to hospitals, that represents a loss of income to those hospitals. Their natural response, in an effort to keep their current infrastructure & salary levels intact, will be to make every effort to increase the rates they charge to all private payers. Your Walmart/Target example is inaccurate, because Medicare gets to unilaterally set prices (constrained only by political pressure) while private insurers are much closer to being price-takers. Cost-shifting from public to private payers is a historical reality in health care, and it's prudent to assume it would continue to happen going forward if public payer rates are cut.
To your other point: If you wanted to assume that sponsors would migrate out of high-benefit designs were those designs to be newly taxed, in order to truly evaluate the impact you'd need to broaden your scope beyond the change in health insurance premiums. Weakening employees' health benefits to avoid the "cadillac tax" is, in essence, a stealth pay cut. As such, I can understand why the consultants chose to ignore potential heavioral effects -- it keeps the analysis much cleaner.
Hey rbb,
There are a number of ways that providers can choose to handle hypothetical revenue and/or profit impacts in ways that don't affect infrastructure and/or the salaries of those they employ. But now were getting into the meat of real healthcare reform and and all the delivery chains that fundamental change might impact. There are acuity care concerns, there's technological trade-offs, there's employment/non-employment of care providers, etc. Just because a decrease in A often leads to an increase in B, it does not mean that it always has to lead to a decrease in B - sometimes a decrease in A can be offset by changes to E, F, G, H, and I and/or changes in the way A operates - without even touching B.
Answering those questions is well outside of the scope of the PWC report. As you would expect from a report literally commissioned by a lobbying group to support that lobby's operations.
What I did was to point out the methodology flaws the report - the methodology flaws PWC's own spokesman David Neston owned up to in a press release last night - from the press release:
"As the report itself acknowledges, other provisions that are part of health reform proposals were not included in the PwC analysis. The report stated on page 1: “The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated.”
It appears that AHIP asked PWC to focus on aspects of the bill it didn't like and ignore other parts. While that's certainly within their right, it doesn't make the overall conclusions AHIP drew from that report correct. That said, PWC's choosing to ignore the potential behavioral effects in their model (even while acknowledging their reality in their text - a sort of weak mea culpa) is pretty lame. Even if it does keep their analysis cleaner (though wrong).