Truth Squad: Is “Obamacare” Pushing Health Care Spending Higher? What Will Happen in 2014?

In last Tuesday’s debate Mitt Romney suggested that, under Obamacare, health insurance premiums have spiraled by $2,500 per family. Not true.  (Hat tip to Healthcarefinancenews.com.)

 First let’s get the number right: According to an annual survey of employer plans  by the Kaiser Family Foundation and Health Research & Educational Trust, since the Affordable Care Act (ACA) passed in 2010, the average annual premium for family coverage has risen by $1,975 not $2500.  $1975 is a hefty sum, but 20% less than Romney claimed.

More importantly, $1,975 represents the combined increase in contributions made by employers and employeeswith employers picking  up the lion’s share of the hike. “In reality, premiums paid by employees haven’t changed that much.Factcheck observes. In fact, when you look at the rise in how much employees contributed, “the federal health care law was responsible for a 1 percent to 3 percent increase because of more generous coverage requirements.” In other words, employees were paying a little more, but getting value for their dollars.

After telling a whopper about how much employee’s health care premiums have risen in the past, Romney went on to assert that if Obamacare is  “implemented fully, it’ll be another $2,500 on top” of that. His evidence?  None.

                                              The Media Spreads the Myths

Yet the media continues to swallow the notion that under “Obamacare” health care spending will levitate. A few days ago, the Washington Post’s Robert J. Samuelson wrote: “Almost every expert agrees that controlling health costs is the crux of curing chronic budget deficits. Health-care spending already exceeds a quarter of federal outlays. With Obamacare’s coverage of the uninsured starting in 2014 and retiring baby boomers flooding into Medicare, the share is headed toward a third.”

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The Affordable Care Act’s “Penalty”: If You Don’t Buy Health Insurance in 2014, How Much Will You Pay?

Note to readers; a longer version of this post originally appeared on HealthInsurance.org, along with a penallty calculator.

Despite the hullabaloo about the Affordable Care Act’s mandate that nearly everyone puchase heath insurance in 2014–or pay a penalty–the Congressional Budget Office estimates that only 1.4 percent of Americans will wind up paying the tax.

That is because the vast majority of us either have health insurance, or are exempted from the mandate for any one of a number of reasons.  For example, at the end of 2014 you will owe no tax if:

  • your income is low enough that your share of premiums (after federal subsidies and employer contributions) would total more than 8 percent of your income;
  • your income is below the income tax filing threshold, and so you’re not required to file taxes;
  • you were uninsured for less than three months of the year (If over three, the penalty is pro-rated);

As a result the Urban Institute estimates that just 6  percent of the population (roughly 18 million Americans) will even have to consider the question: “Should I purchase health insurance, or pay a tax?” That’s right: a whopping 94 percent of the population will have no reason to worry about paying a penalty.

And 11 million of that 18 million will be low-income or middle-income Americans who are eligible for a government subsidy to help cover the cost of their premiums. Chances are, most of them will take the government up on its offer.
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What Will the Supreme Court’s Decision Mean for the November Election?

Thursday, when Chief Justice Roberts explained that the Affordable Care Act (ACA) is constitutional because the “penalty” that some Americans will have to pay is, for all practical purposes, a “tax,” you could hear tea cups shattering from Billings to Boca Raton. In conservative and libertarian circles, the initial reaction was shock, but it didn’t take long for President Obama’s opponents to rally.

The word “tax” might as well have been a pistol shot at a horse race. In the blink of an eye, Obama’s opponents were off and running, megaphones in hand, blasting the president for lying to the American people while hiking taxes under the guise of healthcare reform. Presidential candidate Mitt Romney’s campaign then began providing regular Twitter updates on the campaign contributions it was raking in following the decision. Friday, it announced that it had collected $5.5 million.

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The New York Times “Gets Cracking” on Rising Health Care Costs

On Sunday the New York Times published an editorial that set out to analyze “The High Cost of Health Care.” The result might best be described as “muddled.”

What is exasperating is that about 85 percent of the facts in the editorial are true. But a good 15 percent are simply wrong.  And the Times’ editors managed to weave truth and error together in such a way that it would take a knitting needle to separate the two. As Matthew Holt put it on The Health Care Blog: “the piece looks entirely as though it was written by a committee that couldn’t agree with itself.”

As you read the editorial, you can almost see the editors sitting around a table, negotiating. “Okay,  we’ll let that sentence about the value we’re getting for our dollars stand—as long as well keep this sentence about  ‘skin in the game.’”  The result, a mix of propaganda and analysis, is far more dangerous than outright lies because the many true facts make the whole thing sound credible.   

Because I hate to see our paper of record disseminate disinformation, I am going to try to separate the wheat from the chaff. Begin with the truth: Near the top of the story, under a sub-head that reads “Varied and Deep-Rooted,”  the Times provides a nice summary of the main reasons why we lay out roughly twice as much as the average developed nation, without getting care that is twice as good:

“we pay hospitals and doctors more than most other countries do. We rely more on costly specialists, who overuse advanced technologies, like CT scans and M.R.I. machines, and who resort to costly surgical or medical procedures a lot more than doctors in other countries do. Perverse insurance incentives entice doctors and patients to use expensive medical services more than is warranted. And our fragmented array of insurers and providers eats up a lot of money in administrative costs, marketing expenses and profits that do not afflict government-run systems abroad.”

Spot on. If only this section of the editorial had not begun with a casual half-truth: “Contrary to popular beliefs, this is not a problem driven mainly by the aging of the baby boom generation, or the high cost of prescription drugs, or medical malpractice litigation that spawns defensive medicine.”

They first part of the sentence is correct: the aging of the boomers is not a major cause of health care inflation.  The last clause of the sentence is debatable, though probably true.
What’s troubling is the middle clause:  Why does the Times feel obliged to declare that the “high cost of prescription drugs” is not an important factor behind soaring medical bills?

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Health Care Reform: What Do Americans Want? (Or Think They Want?)

On the surface, it seems that American voters have made their will clear.  Poll after poll shows that they are calling for a major overhaul of our health care system.

But when you look closer, their responses bristle with contradictions, contradictions that I think the reform-minded presidential candidates will have to consider when deciding how to approach health care reform. 

In a poll reported in Health Affairs at the end of last year, sixty-nine percent of respondents rated the US system as “fair” or “poor.” Yet in the same survey, when asked about their own experience with receiving medical services or with their own physician, 80 percent who had received care in the last year ranked their care as “excellent” or ”good.”

Other polls reveal the same pattern.

According to a survey released by Greenberg Quinlan Rosner in July, voters express doubts about the quality of the American health care system (with 49 percent dissatisfied), while 74 percent were dissatisfied with the cost.   Yet, “at another, more personal level,” the pollsters note, “a slightly different picture emerges. Fully eight in ten (82 percent) describe themselves as satisfied with the quality of the health care they receive personally. This number jumps to 90 percent among seniors (64 percent very satisfied), but includes impressive majorities of nearly all groups…”

Nevertheless, when the pollsters asked the same group about health care reform, three-quarters called for “major changes” or “completely rebuilding” the system. 

If they are satisfied with the care they are receiving, why would they want radical change? Because they don’t feel secure that they will be able to keep what they have:  “There’s a precariousness to Americans’ contentment with their own health insurance coverage,” the Kaiser Family Foundation reported after looking at a number of polls at the end of last year.  “Among the insured, six in ten are at least somewhat worried about being able to afford the cost of their health insurance over the next few years, and nearly as many (56 percent) said they worry that by losing a job, they or their family might be left without coverage.”

This, then, is why so many Americans want universal health care: it would guarantee that they and their families would always be covered.

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Conditional Cash Transfers: An Interim Model for Health Care Reform?

This past September, New York City’s Mayor Bloomberg welcomed 5,000 families into the pilot program of Opportunity NYC– the nation’s first conditional cash transfer (CCT) program. Based on a Mexican program called Oportunidades, CCT programs like Opportunity NYC (ONYC) provide financial incentives for poor households to “meet specific targets” in three areas: education, employment/training, and health.

I recently spoke with Héctor Salazar-Salame, Advisor to the Center for Economic Opportunity, which operates ONYC, about the health components of the program. I wanted to get an idea of the aims and strategy behind ONYC—and also to learn more about CCT as a potential model for thinking strategically about health care reform. 

According to the city’s press release, ONYC’s health incentives will be offered “to maintain adequate health coverage for all children and adults in participant households as well as age-appropriate medical and dental visits for each family member.” In terms of coverage, families can earn “$20 or $50 per adult per month for maintaining health insurance and $20 or $50 for maintaining health insurance for all the children in the family.”

The point is to encourage low-income families to enroll in health insurance plans. “Many families work for employers that offer insurance,” Salazar-Salame explains, but “many times the necessary employee contribution is quite high for low-income families. We’re providing an incentive for families to opt into their work-based, private health plan—and hoping that the incentives will help them offset the cost of the employee contribution.”

If parents are unemployed—or work for employers that don’t offer coverage—the family can still be eligible for health incentive rewards that keep them enrolled in Medicaid. “We know that to recertify for Medicaid can be a challenging yearly process that takes a lot of time,” says Salazar-Salame. (It’s worth keeping in mind that roughly 30 percent of parents who don’t manage to enroll or re-enroll their children in Medicaid have less than a high school education).  “We’re hoping the incentive will help them maintain the insurance that they’re eligible for,” Salazar-Salame explains.

Maintaining insurance is harder than it sounds. In October, Maggie wrote about  just how difficult it can be to stay enrolled in Medicaid and SCHIP, pointing to a Health Affairs article titled "Why Millions of Children Eligible for Medicaid and S-Chip Are Uninsured."

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Massachusetts Health Reform: The Canary in the Gold Mine?

Advocates for health care reform have been keeping an eye on Massachusetts, hopeful that its new health reform law will serve as a pilot program for the nation.

I’m much less hopeful than I was two days ago.

Yesterday I attended the Massachusetts Medical Society’s Eighth Annual Leadership Forum where I was one of four speakers. This year, the Society (which owns The New England Journal of Medicine)  focused on the cost of health care –with a special emphasis on funding universal coverage in Massachusetts. The new was not good. While the citizens of   Massachusetts believe that everyone has a right to health care (when polled 92% say “yes”), no one wants to pay for universal coverage.   When asked “if the only way to make sure that everyone can get the health care services they need is to have a substantial increase in taxes [should we do it] 55% said “no.”

One speaker at the forum recalled a man who explained why taxpayers shouldn’t have to pick up the bill: “The government should pay for it.” (He didn’t disclose who he thinks “the government” is. )

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Replying to Comment on “Should 21-year olds pay less,”

Barry—

Thanks for your comment on “Should 21-Year Olds Pay Less . . .” While we’re in agreement on many points, I have to disagree with your first sentence—that “in theory the Massachusetts approach of charging older people up to twice as much as younger people for health insurance is more reasonable, in my opinion, than pure community rating because younger people, as a group, incur far lower healthcare costs.”

I believe that insurance, by definition, is supposed to get everyone into one pool so that those who need less care can help those who need more care.  You are, of course, right that younger people incur far lower costs—until they get older. At that point, another generation of young people will help pay for their care. That’s how insurance is supposed to work.

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If We Mandate Insurance, Should 20-Somethings Pay Less?

Should insurers be able to offer less expensive policies to the young and healthy? Or should they be required to offer the same benefits to everyone at the same price?

In states where insurance is mandated, should twenty-somethings get a break? In a post on Health Care Policy and Marketplace Blog Robert Laszewski addresses these questions. He begins by focusing on a report  just released by the health insurance trade association (AHIP). The study looks at state health insurance reforms of the 1990s that tried to eliminate discrimination by insisting that insurers must sell “individual” policies to people who are not covered by an employer or another group without discriminating on the basis of health, age or gender. According to the AHIP, these reforms have had some “unintended consequences.”

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Should People Who Don’t Take Good Care of Themselves Pay More for Health Insurance?

When healthcare reformers talk about making health insurance fair, some suggest that people who don’t take care of themselves really shouldn’t expect the rest of us to pay for their folly. They point to a study published in 2002 showing that, each year, the average smoker needs an extra $230 worth of inpatient and ambulatory care. “Problem drinkers” require an additional $150; obesity adds $395 to the annual bill, while simply being overweight costs an average of $125 a year. (According to researchers about one in three Americans are overweight while in one in five is obese).

Asking those who puruse less-than-healthy lifestyles to pay higher healthcare premiums seems, on the face of it, a simple matter of equity. But one needs to ask: what will be the effect? And where do we draw the  line?

 

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