The Wonk Room

Fact Check: Rove Uses Fuzzy Math To Argue Health Reform Would Increase Premiums

This morning, former Bush adviser Karl Rove pulled out a Russert-esque white board to argue that premiums would increase under health care reform in the individual market. Rove relied on a series of Congressional Budget Office (CBO) numbers and claimed that tax increases, the cost shift from Medicaid expansion and insurance reforms could raise premiums by $4,000:

Four studies by outside groups have found the likelihood of higher premiums, but they are just estimates. The most solid numbers have come out of the CBO, but even then, it was only a partial state. Outside groups estimated that insurance premiums would increase by 20% to 50% under the bill over what they would otherwise be, and the CBO report, which looked at the three bottom insurance programs, found that in 2016, without reform, those policies would cost an average of $11,000. With reforms, they would cost $15,000 or an increase of roughly $4,000.

Watch it:

Rove’s reasoning is as pernicious as his math. In its September 22nd letter to the Senate Finance Committee the CBO does project that premiums in the none group market would cost approximately $6,000 for individuals and $11,000 for families, but it also demonstrates that health premiums would be cheaper for a majority of families. Here is how:

1. Overwhelming majority of Americas will pay less than $11,000: Under the House and Senate bills, an individual who does not qualify for subsidies would pay between $5,200 and $5,300 in premiums for a health policy from an exchange (saving up to $800). Premiums for family policies would cost between $14,100 and $15,000, but over two-thirds of exchange enrolless would qualify for subsidies and would spend less than $11,000 on their premiums. In fact, MIT economist Jonathan Gruber extrapolated the CBO data to argue families could actually see savings “ranging from almost $8500 for low income families to almost $1,400 for higher incomes.”

2. More value for the premium dollar: Ultimately, it’s misleading to compare a policy in the exchange with a plan in the individual market. Policies sold in the existing market offer less benefits and even fewer consumer protections. Without reform, older Americans or anyone with a pre-existing condition would not be able to find coverage in the individual market — much less afford it. In its September 22nd letter, the CBO writes that under reform, Americans would receive more value for the premium dollar (plans sold in the exchanges would have higher actuarial values).

All of this is explained in the CBO reports, but omitted in Rove’s white board arithmetic. Rove also misrepresents the so-called “cost-shift” between public and private payers and ignores reform’s the payment increases for both Medicare and Medicaid providers.

Does The Senate Health Bill Really Cost $2.5 Trillion?

Over at TPMDC, Brian Beutler takes apart the Republican argument that the mischievous Democrats fooled the non-partisan Congressional Budget Office (CBO) into thinking that the cost of the Senate bill is $848 billion over 10 years, when the real figure — GOP staffers discovered — is $2.5 trillion:

It appears as if the number comes from a press release from Budget Committee ranking member Judd Gregg (R-NH), written the morning after the CBO released its analysis, which reads “American taxpayers are about to see an unprecedented expansion of the federal government that will cost a staggering $2.5 trillion when fully implemented.”

On Saturday, Republicans repeated the figure over and over while debating the motion to proceed:

Moving the start date of the exchanges and most other benefit-heavy policies to 2014 helps bank more money for reform (and meet the President’s $900B limit), but the bill doesn’t exactly hoard away billions to pay for benefits. According to the CBO, between 2013 and 2015, the government takes in $54 billion, but pays out $12 billion to insure Americans who are denied coverage in the individual market and gives tax credits to small businesses that choose to offer health insurance coverage. Over that time period, the bill collects taxes from the health care industry — cuts the industry has already generally agreed to — and banks $42 billion for implementing reform and expanding the system to accommodate 31 million newly-insured Americans.

The government spends more on health care in the first 10 years but during the decade following the 10-year budget window, “the increases and decreases in the federal budgetary commitment to health care stemming for this legislation would roughly balance out, so that there would be no significant change in the commitment.” As Beutler points out, “the critique elides the fact that, whatever the federal responsibility for health care becomes as a result of this bill, it’s projected to dramatically reduce the deficit in both the near and long term.” And that’s something Republicans didn’t care for until the Democrats introduced legislation taking on the health insurance industry.

Wallace Selectively Quotes CBO To Suggest Senate Bill Increases Costs

This morning on Fox News Sunday, host Chris Wallace selectively quoted the Congressional Budget Office analysis of the merged Senate legislation to suggest that the Senate health legislation would increase government outlays on health care over 20 years and bend the cost-cure upward:

WALLACE: According to the nonpartisan Congressional Budget Office, federal outlays for health care would increase during the 2010-2019 period and the government run health insurance plan would typically have premiums that were somewhat higher than the average premiums for the private plan. So here’s the question. The Democratic plan by the CBO’s own scoring fails to bend the famous health care cost curve at all over the course of these 10 years, and could you name a single Congress that has ever cut Medicare by half a trillion dollars as this legislation would?

Watch it:

As Sen. Arlen Specter (D-PA) pointed out, the $848 billion bill “would save $130 billion in the first 10 years and projected to have $650 billion saved in the second 10 years.” Page 16 of the CBO report does predict that “federal outlays for health care would increase during the 2010-2019 period,” but the last paragraph of that same page also notes that “during the decade following the 10-year budget window, the increases and decreases in the federal budgetary commitment to health care stemming for this legislation would roughly balance out, so that there would be no significant change in the commitment.”

As a result, the federal government would be spending less on health care in the decades following the initial 10-year window, despite the expansion in coverage:

Wallace’s claim that the bill “fails to bend the famous health care cost curve” is also inaccurate. The legislation establishes an Independent Medicare Advisory Board (IMAB)– which is required to “recommend changes to the Medicare program to limit the rate of growth in that program’s spending” — and places a 40% excise tax on insurers that offer expensive policies. While the budget office did not analyze the effect of the legislation on national health expenditures, the CBO is predicting that spending per Medicare beneficiary would decrease, as compared to the growth rate of the past two decades (from 8% growth rate to 6% growth rate).

As for the public option, the CBO did conclude that the plan could attract sicker enrolles and charge slightly higher premiums, but it would still reduce average premiums “and hence federal subsidies for premiums.” “That’s because average premiums would be even higher if the people enrolled in the public plan enrolled in private plans.” In fact, the CBO has concluded that the Senate’s public option would save the government $3 billion over 10 years.

Finally, Congress did pass a series of Medicare cuts as part of the Balanced Budget Act of 1997 that were actually deeper than anything being considered today. That act decreased Medicare spending by 12.7% over 10 years and instituted the kind of payment updates that the Senate bill is now recommending. The Senate health care bill would cut Medicare by some 5-6% over 10 years. Specter voted for that bill, with many of his then Republican colleagues.

Blanche Lincoln Justifies Opposition To Bill That Includes Public Option With Disingenuous Argument

NOTE: We are live-tweeting the Senate vote for cloture on the motion to proceed at @wonkroom.

In a dramatic and long winded speech on the floor of the Senate, Sen. Blanche Lincoln (D-AR) announced today that she would provide the 60th vote “in support of cloture on the motion to proceed” to the health care reform bill. But Lincoln also stressed that she is “opposed to a new government administered health care plan as a part of health care reform and will not vote on the health care proposal introduced by leader Reid as it is written”:

I’ve already alerted the leader, and I’m promising my colleagues, that I’m prepared to vote against moving to the next stage of consideration as long as a government-run public option is included. The public option as a part of health insurance reform has attracted far more attention than it deserves. While cost projections show that it may reduce costs somewhat, those projections don’t take into account who pays if it fails to live up to expectations. If in fact premiums don’t cover the cost of the public plan, it is taxpayers in this country who are faced with the burden of bailing it out.

Watch a compilation:

The Senate bill requires that “the premiums for the public plan be set to fully fund expenditures for medical claims, administrative costs, and a contingency reserve” and instructs the Secretary of Health and Human Services to negotiate reimbursement rates with physicians. The Senate’s public option would save the government $3 billion over 10 years, the Congressional Budget Office has concluded.

Lincoln, who supported giving Americans the choice of enrolling in a public option as recently as July, is arguing that the option could ignore the letter of the law and charge premiums that would not cover the cost of the program. Her skepticism may be well-founded, but it’s also short-sighted and inconsistent. She is doubting the integrity of the public option, while tacitly assuming that private insurers — who have a long-standing practice of exploiting loopholes in the law and skimming on coverage for beneficiaries to increase profits — will follow the new benefit and rate regulations. Lincoln supports ‘building on the current system’ and regulating private insurers without questioning their commitment to “live up to expectations.”

Ultimately, if she’s is worried that the language of the health care bill won’t be properly implemented, she should encourage the Senate to establish a federal oversight mechanism that could force private health insurance companies and the public plan to abide by the new rules of reform. As it stands now, her objection to the public plan sounds rather manufactured and hypocritical.

Landrieu To Provide 59th Vote On Motion To Proceed, Responds To ‘Some Very Partisan Republican Bloggers’

NOTE: We are live-tweeting the Senate vote for cloture on the motion to proceed at @wonkroom.

This afternoon, Sen. Mary Landrieu (D-LA) took to the Senate floor to announce that she would vote on a motion to proceed with the Patient Protection and Affordable Care Act. Landrieu is the 59th Senator to commit to voting to open debate on the floor. Senate Majority Leader Harry Ried (D-NV) would still have to secure the support of Sen. Blanche Lincoln (D-AK) to begin considering the legislation.

In her remarks, Landrieu stressed that she was concerned about the bill’s costs to small businesses and individuals, the possible premiums spikes families could face in the time between when the bill passes and its reforms are implemented, and reiterated her opposition to a public health insurance option:

My vote today to move forward on this important debate should in no way be construed by the supporters of this current framework as an indication of how I might vote as this debate comes to an end. It is a vote to move forward to continue the good, and essential, and important and imperative work that is underway….We must enhance and expand tax credits that are in this bill that are for small businesses, particularly those of 25 and less and if we can expand it between 25 and 50, that would be a great help…I will continue to fight for more tax equity for the 27 million Americans who are currently self employed…in order to really deliver on our promise to lower costs for families focus on ways for premiums to be excessively raised between the time this bill is enacted and the time these provisions go into affect … I remain concerned that the current version of the public option included in this bill could shift significant risk to tax payers over time, unnecessarily…I’ve suggested that a free-standing community option…

Watch a compilation:

Landrieu also directly responded to “some very partisan Republican bloggers” who suggested that she agreed to support the bill only after Reid included “an extra $100 million in federal aid for low-income people in her state. “The Louisiana money is intended to adjust the percentage of federal payments to the state for Medicaid to avert a scheduled cut in U.S. assistance in 2011 for the program, which provides medical care for the poor. Louisiana had a bump in per capita income from the post-Katrina construction boom, which would force the decline in federal aid.”

Landrieu explained that following the hurricane, “some of those one-time recovery dollars were calculated into our per-capita income” and inflated the state’s income. As a result, the state is scheduled to receive less matching fund for the Medicaid program. “It is the number one request of my Governor, who is a Republican and it is unanimously supported by every member of our delegation, Democrat and Republican. I’ m proud to have asked for it. I’m proud to have fought for it, and I will continue to,” she said.

Why Does The Senate Bill Establish Two Separate Exchanges?

Over at FiredogLake, Jon Walker points out that the merged merged Senate bill would “create two exchanges per state. There would be an exchange for individuals and a “Small Business Health Options Program” know as the SHOP exchange for businesses.” “This is, pure and simple, a dumb idea,” he writes. “The more customers using one exchange the larger the risk pool and the better the bargaining power.”

It’s unclear why the Senate separates the individual and small business markets rather than follow the Massachusetts model of combining the two markets. Under the Senate bill, insurers would pool risk for all policies in the individual market (inside and outside of the exchange) and all small business policies (inside and outside of the exchange) but couldn’t combine the risk unless the state voluntarily merges the two markets.

As Sarah Lueck explains, allowing multiple exchanges to participate in the same geographic area would increase administrative costs and “diminish the ability of an exchange to improve efficiency by creating a well-functioning marketplace”:

If there were multiple exchanges in the same area, the exchanges would have to spend money on marketing and advertising in order to attract customers….Also, permitting multiple exchanges in a single area would require a vastly more complex risk-adjustment system. Risk adjustment provides higher payments to insurers enrolling higher-cost beneficiaries, while lowering payments to plans enrolling healthier individuals with lower-than-average costs. In areas with multiple exchanges, the risk-adjustment mechanism would have to compensate for risk differentials across the various exchanges, as well as among the insurers within each exchange. This would make it more difficult to risk-adjust accurately.

One possible reason for the separation, a source suggests, is the reluctance of some insurers operating in the small group market to expand their options to individuals. The may not want to change their business model or cover a potentially sicker crop of newly insured individuals.

The so-called SHOP-exchanges have also been promoted by the National Federation of Independent Businesses (NFIB) and championed in the Senate by Sens. Dick Durbin (D-IL), Blanche Lincoln (D-AK) and Sen. Olympia Snowe (R-ME). But why they’re still necessary in the broader context of health reform is somewhat of a mystery.

SHOP may not make policy sense, but it may help win the support of a few moderate lawmakers.

A Doctor Should Know Better: Coburn Says ‘Botox Tax’ Would Apply To Reconstructive Breast Surgery

Cosmetic surgeons and some conservative lawmakers are mischaracterizing that the new 5% “botox tax” on cosmetic surgeries and procedures in the merged Senate health reform bill. The tax, which would raise an estimated $5 billion over the next decade to help fund health reform, is narrowly tailored towards voluntary cosmetic procedures. But some critics, like long-time contrarian Sen. Tom Coburn (R-OK), are suggesting that the reform bill would also tax more serious operations, like breast reconstruction surgery following cancer:

Just yesterday — the day before yesterday, U.S. preventive task forces, services, recommended because it’s not cost effective that women under 50 not get mammograms unless they have risk factors. Well, you tell that to the thousands of women who were diagnosed with breast cancer lat last — last year under 50 with a mammogram. You tell them it’s not cost effective. Also in this bill is a 5% tax on the breast reconstruction surgery after they had a mastectomy. They’re going to tax having your breast rebuilt after your breast is taken off because it is elective plastic surgery. It is elective cosmetic surgery. We’re going to have a tax on it because we’ve taxed elective cosmetic surgery. We’re in trouble as a nation because we’ve taken our eye off the ball.

Coburn may be one of only two doctors serving in the Senate, but he’s no more knowledgeable about what constitutes ‘elective cosmetic surgery’ under reform legislation, than the average layman. Section 9017 of the merged Senate bill relies on the IRS definition of ‘cosmetic surgery,’ which defines the procedure as “any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.”

The Senate bill doesn’t tax all cosmetic operations. Surgeries to “ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease” are excluded from taxation.

Under that standard, surgery performed to reconstruct a woman’s breast after cancer — a disfiguring disease — would not be taxed:

The tax is intended to discourage consumers from undergoing unnecessary surgeries or procedures. As much as one-third of nation’s health care expenditures are spent on procedures that don’t improve health outcomes. Capturing some of that spending and re-investing it into health care reform would help to slow the growing rate of health care spending, finance reform, and ultimately reduce costs for everyone. In short, the tax would help fill the wrinkles in America’s broken health care system.

Merged Senate Bill Removes 5-Year Grace Period For Grandfathered Policies

The Senate Finance Committee’s health care reform bill and the House legislation require insurance issuers to meet certain basic benefit standards, but grandfather all existing insurance plans for a period of 5 years (the House bill only applies this restriction to current employment-based health plans) . If insurers do not comply with the new federal requirements after the 5-year grace period, they would no longer be able to offer health care coverage.

The merged Senate bill takes a different approach. Section 1251 eliminates the 5-year period and allows enrollees to remain in their insurance plans for as long as the coverage remains available:

By 2017, most Americans will have the option of purchasing comprehensive insurance coverage within the Exchange and would theoretically abandon plans that offer sub-prime benefits and high-deductibles. Insurers that want to minimize their administrative overhead and standardize their plans, may also modify all existing policies to meet the new federal guidelines.

Under the Senate bill, individuals under 30 years of age or those who are exempt from the individual mandate, could still chose to enroll in a catastrophic plan that covers essential health benefits.