From the moment the the Republican leadership released its alternative approach to health care reform, critics (including me) pointed out that it was unlikely to make a dent in the number of people without insurance. On Wednesday, the Congressional Budget Office came out with its preliminary estimates of what the bill will do. And, sure enough, the critics were right. Overall, ten years into implementation, the plan would not significantly change the number of people with health insurance. In all, 17 percent of the legal, non-elderly pouplation--or about 52 million children and working-age people--would still have no coverage.
The Republicans, to be fair, never claimed that their plan would do otherwise. Indeed, the essence of their pitch--again, as discussed previously--is that they focus on cost while Democrats focus on coverage. And the CBO certainly agrees that the Republican plan will reduce premiums. According to the projections, premiums would drop by between 7 and 10 percent for employees of small businesses, between 5 and 8 percent for people buying coverage on their own, and between 0 and 3 percent for workers who get coverage through large employers.
That finding had Republicans like Representative Tom Price crowing on Wednesday.
Giving patients greater control and making specific common sense reforms will lower the cost of health care for all Americans. The Republicans’ straightforward plan will decrease insurance premiums by up to ten percent. Meanwhile, the Democrats’ 2,000-page plan to give Washington more control via tax increases, mandates, bureaucracies, czars, and government-run insurance will not lower costs. We seek to lower costs by giving Americans more control over how they spend their health care dollars, allowing the purchase of coverage across state lines, ending costly lawsuit abuse, and providing important protections for those with pre-existing conditions. In just 200 pages, Republicans have proven that we can improve the portions of our health care system which need fixing without giving Washington control over one-fifth of our economy. Republicans have the answer to lowering health care costs – put patients in charge.
But is that really what the CBO said? Read the full write-up more closely and you’ll see the message was a bit more complicated.
Let’s start with the claim that the Democratic plan “will not lower costs.” That’s simply not true. The CBO has now run projections on the bills that have come out of both the House and the Senate Finance Committee. And, in both cases, the CBO found that the Democratic bills would reduce federal deficits both within and beyond the ten-year planning window--by a larger margin than the Republican bills would.
To be sure, the CBO hasn’t yet made a pronouncement on how the Democratic bills will affect premiums, except for inside the new insurance exchanges. And that, I suspect, is the part of the “cost” projection Republicans want to make the focus of attention. But that’s only because those estimates aren't finished. As the report explains, CBO is only making such calculations now, at the request of lawmakers. And because the Democratic bills have so many interacting reforms, it’s taking a lot longer to figure out how those reforms will play out.*
But the CBO write-up has some other important caveats. For one thing, those figures for reductions in premiums are averages. And under the Republican bills, the CBO notes, there will be enormous variation in rates between the sick and the healthy. Remember, unlike the Democrats, the Republicans--in their determination to avoid passing new regulations--wouldn’t prohibit charging people more because they have pre-existing conditions or would otherwise represent greater-than-average health risks.
Many individuals and families would experience changes in premiums that differed from the changes in average premiums in their insurance market. As explained below, some provisions of the legislation would tend to decrease the premiums paid by all insurance enrollees, while other provisions would
tend to increase the premiums paid by less healthy enrollees or would tend to increase the premiums paid by enrollees in some states relative to enrollees in other states. As a result, some individuals and families within each market would see reductions in premiums that would be larger or smaller than the estimated average reductions, and some people would see increases. [Emphasis mine]
Finally, whenever you hear that a reform plan will lower premiums, you should ask a follow-up question: How? In particular, would my premiums come down because I’m paying less for medical care and insurance coverage? Or am I just getting less medical care and insurance coverage? By weakening or removing requirements that insurance cover certain services--everything from cancer screenings to mental health--the Republican bill would likely result in people getting insurance that covers less. That is, based on a quick canvassing of people who have read the report, the meaning of this passage:
The second source of change in average insurance premiums is changes in the average extent of coverage purchased. ... With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates.
So, yes, the Republican health care bill will lower premiums overall. But many people in poor health will see their premiums go up. And many people will get lower premiums only because they’re getting inferior coverage. Meanwhile, more than 50 million people will have no insurance whatsoever.
Note: Are wondering what CBO is likely to say about premiums in the Democratic plans? Good question. Watch this space for some answers soon.