Politics Taints Study Touting 4 Million Obamacare Jobs

Monday, 11 Jan 2010 04:34 PM

By Theodore Kettle

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The chief author of the much-touted Center for American Progress study claiming that the Democratic Congress’ healthcare reform legislation will create 4 million new jobs is a longtime Democratic Party political operative and financial donor.

Harvard economics professor David Cutler also served on President Bill Clinton’s Council of Economic Advisers and the National Economic Council Clinton established during his tenure in office. And he was senior healthcare adviser for Barack Obama's presidential campaign, after working in previous election cycles on the presidential campaigns of Sen. John Kerry, D-Mass., and former Sen. Bill Bradley, D-N.J.

Federal Election Commission records show that Cutler contributed to the Obama campaign and gave thousands of dollars to the failed Virginia congressional bids of former Clinton adviser and healthcare researcher Judy Feder.

Yet the mainstream media are touting a well-timed study by this partisan policy analyst that makes the wildest of assertions about the economics of Obamacare. The Center for American Progress paper relies on estimates Cutler made with Karen Davis and Kristof Stremikis of the Commonwealth Fund in a study entitled “Health System Impacts of Health Reform Proposals.”

What exactly is it that will produce the 4 million jobs Cutler is predicting? Cutler assumes that health insurance premiums will drop substantially because of Obamacare, a presumption contradicted by studies that have examined the huge costs of Obamacare’s new regulatory regime.

Healthcare exchanges will reduce “marketing, underwriting, and brokers’ fees charged by health insurance companies,” Cutler promises, with average employer-paid premiums lowered by about 2 percent. Other expected cost-cutters include “better coordination of care,” fixing problems such as “operating rooms and scanners that are run at less than full capacity,” and “streamlining excessive administrative costs.”

In other words, the private sector is wasting so many billions of dollars that, when the federal government steps in and cuts out that waste, employers will use the new money saved to hire 4 million new employees.

The final sentence of the conclusion of Cutler’s study demonstrates its politicized nature and is highly unusual for a supposedly academic analysis – it explicitly recommends passage of a policy proposal now before Congress: “In an economy that has lost 5 million jobs in the past year and where wages have stagnated for many years, this [creation of 4 million jobs] is a strong reason to pass health care reform that contains growth in health care costs and modernizes the U.S. health care system.”

In contrast, a study that the Oliver Wyman consulting firm published last month for Blue Cross warned of big premium increases. After five years, “average annual medical claims in the reformed individual market” would be “54 percent higher than today’s, not including the impact of medical inflation,” according to Oliver Wyman, which has extensive experience in health insurance and actuarial analysis.

“This would translate into premiums for people purchasing new policies of approximately $4,561 for single coverage and $9,669 for family coverage in today’s dollars — representing a premium increase of $1,576 and $3,341, respectively,” the Oliver Wyman study says.

Eight million insured and 25 million uninsured above at or above the poverty level would have access to subsidies to offset the increases, but the Wyman study estimated that average medical claims for the uninsured would be 20 percent higher than claims in the current individual market.

And with Obamacare’s regulatory limits on age rating “in most states, premiums for the youngest 30 percent of the population will increase by 35 percent.”

On top of that, increased requirements on maternity coverage, mental health and rehab services, and other “essential benefits” would increase costs by about 10 percent in the individual market. And “proposed benefit design requirements, including covered services and 60 percent minimal actuarial value, would lead to an average total premium increase of 14 percent in the individual market,” the Wyman study concluded.

That follows the PriceWaterhouseCoopers October report predicting massive premium increases if Obamacare was “not coupled with an effective coverage requirement.” (The legislation now before Congress would leave millions uninsured.)

The “Cadillac plan” excise tax, new taxes on health sector entities that get passed down to consumers, and underlying growth in medical costs means that the average family coverage cost of about $12,300 would rise to $17,200 in 2013, $21,300 in 2016, and $25,900 in 2019, according to the accounting firm’s calculations.

Those and other reports from firms with real experience in the practice of health insurance were not given nearly the media coverage that Democrat operative Cutler's is getting, as Obamacare enters the home stretch toward enactment.

Moreover, as The Los Angeles Times reports, employers who know the health insurance system well are skeptical of Cutler’s conclusions about premium savings and big job growth. Santa Monica attorney Jeffrey Lee Costell, for example, told the paper he probably would delay hiring additional clerical workers because of Obamacare’s requirement that firms with payrolls exceeding $500,000 pay the bulk of insurance premiums.

“It’s going to have a chilling effect,” Costell told the newspaper.

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