The Facts on Health Care Reform

Will the reform bills passed in the House and Senate raise or lower premiums?

The health insurance industry has recently funded two studies that purported to show that health care reform legislation would cause premiums to rise substantially. An AHIP commissioned study by PriceWaterhouseCoopers predicted a 111% increase over 10 years and a Blue Cross Blue Shield funded report by accounting firm Oliver Wyman estimated a 50% or greater increase. When a firestorm erupted, PWC issued a clarification which in a nutshell said "that AHIP paid it to focus on four parts that AHIP didn't like and ignore everything else in the bill." The New Republic's Senior Editor Jonathan Cohn reports that "the big problem with the PriceWaterhouseCoopers study ... was that it treated certain elements of reform in isolation, leaving out key parts that would have changed the outcome. Unbelievably--or, perhaps, all too believably--Oliver Wyman does the exact same thing."

So when more objective analysis was finally presented, it was not surprising to find very different conclusions. In his November 27 report, MIT Professor Jonathan Gruber analyzed data from the non-partisan Congressional Budget Office and found that individuals' premiums in the new exchanges will be "considerably lower than what they would face in the non-group insurance market, due to the market reforms put in place by the Senate Bill, the mandate on individuals to participate regardless of health, and the market economies of new exchanges."

In his December 2nd article (Getting the Facts Straight on Health Care Reform, New England Journal of Medicine), Gruber systematically rejects many of the criticisms of the legislation:

• Government takeover? No. "The primary role of the government in this reform is as a financier of the tax credits that individuals will use to purchase health insurance from private companies through state-organized exchanges. The public insurance alternative that is included in the Senate bill simply adds another competitor — on a level playing field —to the insurance market, and the Congressional Budget Office(CBO) projects that it will enroll only a tiny minority of Americans."

• Budget busters? No. "This is simply incorrect. Both bills are completely paid for — indeed, both would reduce the deficit by more than $100 billion over the coming decade. And the CBO estimates that both would reduce the deficit even more in the long run, particularly the Senate bill with its strong cost-containment measures."

• Attack on Medicare? No. "There is substantial evidence that reducing these overpayments will not harm the health of Medicare patients — just the pocketbooks of those who profit from them. This reform would simply use market bidding to set the reimbursement rate for Medicare Advantage plans, rather than setting administrative prices, which have traditionally been much too high; and it would reduce payments to hospitals by a small percentage, while tying them to outcome measures. Moreover, the dollars that are raised will save thousands of lives each year by increasing insurance coverage among the non-elderly."

• Unafordable mandates? No. "Both bills contain billions of dollars in subsidies to help families pay for health insurance — and an exclusion from the mandate for families that still find coverage unaffordable. Rather than imposing an unaffordable mandate, these bills would finally guarantee that almost all Americans could find affordable insurance."

• Harming the privately insured? No. "CBO data show that the average enrollee in the new exchanges will either pay substantially less or obtain more generous coverage than the average person in today’s nongroup insurance market. Employees of small businesses that enroll in the exchange will also benefit from the lower prices and wide variety of health plan choices available to larger groups, and their employers will benefit from a small-business tax credit. Employees in large businesses will benefit from a shifting of their employers’ money from excessively expensive insurance to increased wages."

• Insufficient cost control? No. "...The Senate bill in particular ... includes a four-pronged attack on health care costs. First, it imposes a tax on high-cost insurance plans that will put pressure on insurers and employers to keep the cost of insurance down, while delivering $234 billion in wage income to workers over the next decade. Second, it includes funds and a structure for comparative-effectiveness research that will provide the information necessary to guide our health care system toward care that works and away from care that doesn’t. Third, it establishes a Medicare advisory board with the power to set rates (subject to an up-or-down vote by Congress) if costs grow too rapidly. Finally, it sets up an innovation center within the Centers for Medicare and Medicaid Services and launches pilot projects to explore alternative reimbursement and organizational structures that could transform the delivery of care.