Friday, May 21, 2010

Who Are You Gonna Believe — Me, Or Your Lying Eyes…?

That’s the impression one might get reading the latest “report” released by the Center for American Progress and the Commonwealth Fund about how health “reform” will supposedly reduce health costs.  The groups released this paper in response to reports by the Congressional Budget Office that the law will raise individual market premiums by an average $2,100 per family and from the Centers for Medicare and Medicaid Services that the law will raise health costs by $311 billion in its first ten years.  Even a cursory analysis of the paper reveals how it comes up short, reflecting a study that may have been drafted in the Land of Make-Believe:

  • One of the study’s authors, David Cutler, was the same Obama campaign adviser who co-wrote the famous memo attempting to defend candidate Obama’s assertion that his health plan would save families $2,500 per year on premium costs.  Cutler’s memo promised savings of $200 billion per year, or $2 trillion over ten years; today’s report asserts only $590 billion in savings over the next decade.  So anyone trying to justify this new $590 billion “savings” number should first explain why the estimated savings from health care reform declined by more than 70 percent in two short years.
  • The report attempts to differentiate itself from the analyses made by non-partisan experts at both CBO and CMS, saying these reports are “limited” and “incomplete” because neither report assigns budgetary savings to various health care delivery system reforms in the law.  In other words, since CBO and CMS didn’t give the groups favorable assumptions about the law’s broader effects, those conclusions should be discarded and replaced with their assumptions instead. (In legal terms, I believe this is called “venue shopping.”)
  • Even the authors admit “there is not much evidence in the published literature on policy reforms short of severe constraints [i.e. government-imposed rationing] that save large amounts of money” – but to solve this “problem,” the authors instead choose to rely on “a less formal, but no less important, literature that sees the world differently.” (I’m not making that part up – they really do admit that it’s “less formal.”)
  • The savings assumption “assumes that a reduction in Medicare and Medicaid payments” under the health law “will not be offset by higher prices to private payers.”  That is of course a highly favorable assumption, and not a likely one either, considering that private payers currently pay an average of nearly $1,800 per year in higher costs due to under-payment by government programs.
  • The report’s higher deficit assumptions stem from an assumption that “90 percent of private health insurance savings are passed on to employees through increased wages, which are taxed.”  So in other words, the report’s authors believe the law will reduce the deficit more than CBO projects due to higher taxes on American workers.
  • The report’s assertion of marginally lower premiums compared to the 2019 baseline assumes that “for purposes of this analysis, we exclude changes in premiums associated with better coverage” – purposefully omitting a factor that CBO said would raise premiums in the individual market by 27-30 percent.  Just as important, this exclusion attempts to ignore what the authors likely consider an inconvenient truth: individuals would be FORCED to buy richer policies, since the mandates in the legislation would mean their current insurance would be “insufficient” in the government’s eyes.
  • As might be expected, the report negates the impact on both deficits and spending from an un-offset solution to Medicare physician reimbursements.  But it’s worth reiterating that the President’s budget presumed a whopping $371 billion in new spending on the “doc fix” – and this report neither includes those costs, nor suggests alternative ways to pay for the “doc fix” absent new deficit spending.

The last several weeks have seen a flood of reports – most recently this morning’s Mercer study – indicating that both costs and premiums will rise as a result of this law.  The report makes an attempt to allege that spending $2.6 trillion on a health care law will lower costs.  But its flawed assumptions, omissions, and inaccuracies mean that any independent observer will see the study for what it’s worth: An unsuccessful effort by an Obama advisor to attempt to defend Democrats’ unpopular – and costly – government takeover of health care.