Now that really would have been shocking news, wouldn’t it? If only, as they say.
Sad to say — but not shocking to report at all — the actual news is the reverse of what my title says:
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.
Administration officials, who spent much of the spring and summer wooing the insurers, questioned the timing and authorship of the report, which was paid for by America’s Health Insurance Plans (AHIP), an industry trade group.
As Ezra Klein reminds us, “He who pays the piper calls the tune.”
Seriously engaging with [the report’s] 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.
To illustrate how this works, let’s go back to another PWC favorite: tobacco taxes. Imagine Congress slaps a $10 tax on each cigarette purchased in the continental United States. The impact is obvious: People will virtually cease purchasing cigarettes, or the trade will move onto the black market. But a PWC report that “assumes payment of tax” would assume that cigarette purchasing remains unchanged, and smokers fork over $30 bazillion (approximately) in taxes. This would mark the beginning of a heretofore unknown phenomenon: nicotine bankruptcy.
At least, it would in the world of PWC’s report. But it wouldn’t do so in the real world. So too with these assumptions. Economists think that the tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don’t build it into their estimate. On Page 6, 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.” That’s a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.
Another interesting bit comes on Page 2, which identifies “new minimum benefit requirements that may require people to buy coverage that is more expensive than options to which they currently have access” as one of the “root causes” of coming premium increases. In the footnote, the report complains that the Senate Finance plan requires a minimum 65 percent actuarial value (that is to say, 65 percent of what an individual is expected to need), while the Massachusetts plan only requires a 56 percent actuarial value. Other states have no minimum value. Insurers will also be forced to cover preexisting conditions, have an out-of-pocket limit, and end rescissions.
It’s true, as the report says, that buying better insurance will cost somewhat more than buying insurance that doesn’t cover anything. The vast majority of the people affected by this will be using subsidies, of course, but put that aside for a moment. This is part of the point of health-care reform: Insurers will no longer have the freedom to offer products that let an individual think his family his protected when the policy will do nothing of the sort. That may raise prices, in much the way that antibiotics cost more than herbal supplements, but it raises prices because it reduces the insurance industry’s ability to sell a deceptive and insufficient product.
If you have the health care industry complaining that we’re going to raise costs because of these changes, it is them putting us on notice that we haven’t put enough cost containment in the bill. You know, the health care industry themselves is putting out a whole report saying that. That should be a tell to the Baucus team that you know what, maybe it’s time for them to go back and revisit the public option.
In a strange way, and look, obviously they didn’t mean this, the health insurance lobby today fired the most important salvo in weeks for the public option, because they have said, as clear as day, left to their own devices, according to their own number crunchers, they’re going to raise rates 111%. And that’s why, you know we have a [petition] at CountdownToHealthCare.com where we’re telling people for the moderates in the Senate, the so-called moderates, and for the White House, we need the public option, and the health care industry is making our argument for us.
Exit point: TNR’s Jonathan Chait wonders why those bloggers in their pajamas were able to find the facts to push back against this report’s misleading conclusions, and Ceci Connolly was not:
Obviously, Cohn and Klein are health care policy experts. But this begs the question of why there isn’t more room for policy experts in the newspaper business.
In fact, I can’t figure why a rigged study conducted by a dicredited group on behalf of a self-interested lobby ought to be the lead story in the Post. Clearly, the fact that the insurance lobby is openly fighting is an important story. But the substance of the report does not deserve the benefit of the doubt. Here is how the Post summed up this question:
Though open to dispute, the analysis is certain to raise questions about whether Obama can deliver on his twin promises of extending coverage to millions of uninsured Americans while also curbing skyrocketing health-care costs.
That’s not the standard (or correct) way to cover dubious, self-interested claims by lobbyists.