Tags: cbo | obama | healthcare

CBO Figures Shows Health Costs Climbing

Wednesday, 02 Dec 2009 02:25 PM

By Theodore Kettle

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An analysis of the Senate health reform bill by the non-partisan Congressional Budget Office is being touted by the Obama White House as evidence that health insurance costs will go down under Obamacare.

“Americans buying comparable health plans to what they have today in the individual market would see premiums fall by 14 to 20 percent,” claimed White House spokesman Dan Pfeiffer, writing on the White House Blog. “Those who get coverage through their employer today will likely see a decrease in premiums as well.”

But the text of the 28-page CBO study itself, requested by Sen. Evan Bayh, D-Ind., and released Monday, says something a lot less rosy, warning that “the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law.”

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The congressional report notes that “About half of those enrollees would receive government subsidies that would reduce their costs well below the premiums that would be charged for such policies under current law.”

Meanwhile, “The effects on premiums would be much smaller in the small group and large group markets,” the CBO forecasts, which together make up 83% of the health insurance market.

Health Policy and Strategy Associates president Robert Laszewski, who has managed a health insurance company, pointed out on his widely-read health care blog on Monday that much of the Senate health reform bill’s “benefits” don’t kick in until 2014 – including those government subsidies the CBO mentions.

But according to Laszewski, there are “a number of reasons to expect even higher health insurance rate increases each year on the way to 2014.”

They include “All of the new taxes and fees the bill creates that begin in 2010” like a $6.7 billion annual tax on premiums, and a 40% excise tax on higher-cost “Cadillac plans” that will likely “hit almost 20% of consumers in group health plans right away,” according to health industry expert Laszewski.

The Senate bill will also make health premiums rise before 2014 because of the legislation’s three-year $25 billion reinsurance assessment that starts that year, he says. Laszewski warns, “Any prudent health plan manager will begin to put the money away for that monster hit sooner rather than later,” which means charging higher rates.

The Lewin Group last month released a study of the Senate bill before it was amended by Senate Majority Leader Harry Reid. The highly regarded health consulting analysis firm found that the Democrats’ health reform would expand national health care spending by $114 billion from 2010 to 2019.

The White House has been accused of manipulation regarding the CBO before. President Obama caused a furor in July when he took the unusual step of “inviting” CBO director Douglas Elmendorf to the Oval Office after Elmendorf disappointed the White House with a forecast that health care obligations would skyrocket by $240 billion over the next decade if Congress’ reform plan became law.

At the meeting, the president surrounded Elmendorf with an intimidating arsenal of his economic advisers, including OMB director and former CBO head Peter Orszag, National Economic Council Director Lawrence Summers, Council of Economic Advisers chairwoman Christina Romer, Harvard economist David Cutler, and Alice Rivlin of the Brookings Institution, who was the very first director of the CBO in the 1970s.

The CBO traditionally thrives on its objectivity and prestige, but after the meeting Elmendorf admitted that “it was exciting to meet the President and be in the Oval Office,” adding that “my kids will be jealous when they get back from summer camp and hear about it.”

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