CBO Confirms: Senate bill will lower costs
Posted on December 1st, 2009 by Jason Rosenbaum in Congress Watch
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The CBO confirmed [pdf] yesterday what Jonathan Gruber concluded: The Senate health care bill will lower health insurance premiums.
Specifically, for those Americans buying insurance in the new "exchange," after you factor in the tax-credits they will receive to afford health care they will end up saving almost 60% over what they'd pay without reform. Those in the small group market - small businesses, for the most part - will see declines of around 10%. And for those in the large group market - larger businesses and typically the most robust health care in our system today - there will be very little changes in price, if anything a reduction of a few percentage points.
But price is only part of the story. As Ezra Klein explains, while costs will go down, quality will shoot up:
The CBO estimates that 57 percent of people in the individual market will receive subsidies to help them purchase health-care insurance (folks on the individual market tend to be much lower-income, with much less stable employment). Those subsidies will reduce premium costs by between 56 to 59 percent for the average beneficiary. So in the final analysis, the effect of reform on your typical individual market purchasers is to give them insurance that's about 30 percent better but only 10 to 12 percent more expensive, and then assure them subsidies that will lower their payments by more than 50 percent. And if you're in the small group or large group markets, your premiums are expected to fall a bit.
Good deal, no?
Reform also increases the quality of the plans in the small and large group markets by making them conform to exchange standards over time.
Bottom line: Under the Senate health care bill, your health care will definitely get better. And if you get your insurance through a small business or on your own, your costs will go down.
Which is not to say the Senate health care bill is perfect - there is still a lot of work to be done, particularly on making sure health care is truly affordable for everyone - but the numbers are in, and reform works.
Is it just me, or does this math make no sense at all? Just because people are getting federal subsidies to pay their outrageously expensive premiums, that does not make the premiums less expensive. It just shifts the cost to the government (ie, the taxpayers).
I'm an ardent supporter of health reform, but without REAL price controls, a REAL public option with some teeth in it, and REAL substantive insurance reform, I don't see the point.
The CBO is confirming that prices - the raw underlying prices - wouldn't go up nearly as quickly as they would without reform after 3 years of the program being active. It'll take longer than that to bend the cost curve downwards, given the amazing upward trajectory we're on, but undeniably, the CBO says we're starting that process.
Thanks for your response, Jason. I understand the CBO's conclusions. But they are leaving out a very big factor: the insurance companies' relentless drive for profits.
Aetna recently announced that they will raise 2010 prices, losing around 600,000 customers in the process. Do they care that these customers will leave? Nope. They're happy to see them go. Because their profits will go up.
Even if health reform includes provisions to improve efficiency, bring healthier folks into the system, etc etc as Ezra Klein says, I don't believe that will cause the insurance companies to reduce their rates. They will just increase their profit margins, and everybody will be happy. Except their customers. But they've already proven that the customers don't matter. So yay! Problem solved.
This only works to a point. Insurers can indeed force out the less profitable, but at some point, it's diminishing returns. If they raise their rates so much that everybody switches to the lower cost public option, they no longer have a business.
True … IF there is a public option, IF everybody has the option of choosing it, and IF it costs less. Those are big if's. We'll see.
No, not quite.
In the exchange, the CBO has determined the public option as designed in the House will lower overall premiums on average, even though it's premiums will be higher than private insurance. This works because it acts as a cap on premiums. If private insurance decides to raise prices, the public option won't follow suit and will steal all their business.