Those who oppose reform have been using the recent CBO report to claim that, under the Senate bill, many Americans will pay more for health care.
That’s not what CBO said. A careful reading of the report suggests that even people in the individual market will wind up paying less because under reform, insurance is likely to cover more of their health care costs.
First, here’s what CBO actually said: For most Americans who have group insurance (usually through an employer) there will be little change in their premiums. Those who purchase their own insurance in the individual market (usually the self-employed and early retirees) could see their premiums rise by 10 percent to 13 percent in 2016. But, “that extra cost would buy better coverage, the CBO said, and hefty federal subsidies would drive down payments by nearly 60 percent on average for low- and middle-income families.”
Why the Total Cost of Health care Would Be Lower
Moreover, a close-reading of the report reveals that it’s not just that reform will force insurers to offer a better package of benefits. Under reform legislation, CBO points out, insurers would “cover a substantially larger share of the enrollee’s costs.”
This is because today, many of the policies that Americans purchase in the individual market carry very high deductibles and co-pays.
Deductibles and Co-Pays
According to the AHIP October 2009 report on individual insurance, today more than 60 percent of families who buy their own insurance in the individual market have deductibles of $5,000, $10,000—or higher. This is because many can’t afford a plan with a lower deductible.
In the individual market, the average premium for a family plan that has no deductible is $12, 686 . If you buy a plan with a $10,000 deductible, the premium comes down to a more affordable $5,380.
Roughly 95 percent of policies sold in the individual market are Preferred Provider Organization plans (PPOS which let a patient go “out of network”), and 45 percent of those have an annual out-of-pocket limit that exceeds $10,000.
Under these plans, out of pocket spending can mount quickly. After paying off the deductible, many families face stiff co-pays: 88% of these policies call for co-pays that range from 20% to 39% of the cost of the service.
Roughly 60 percent require a co-pay of $30 to $60 for a primary care visit; 31 percent require co-pays of $40 to “$50 or more” for a visit with a specialist.
By focusing only on premiums, many commentators ignore the total cost of health care for customers in today’s individual market.
“Considerable Uncertainty”
Finally, let me emphasize that the CBO’s premium projections should be taken with a grain of salt.
As always, the CBO guesstimate fails to include savings that it cannot easily calculate. For example, the report acknowledges that while the Senate bill calls for changes in the way health care is delivered that would encourage more effective, collaborative care, CBO’s premium projections do not attempt to factor in those savings.
When CBO—or anyone—tries to estimate how much reform will cost or save, they face a great many question marks. Most of the unknowns are tied to the fact that we cannot predict how people will respond to many provisions in the reform legislation. How many young and healthy people will choose to pay the penalty rather than buy mandated insurance? If the penalties are raised, how many more will join the pool?
How will doctors and hospital executives respond to financial carrots and sticks that are meant to lift the quality of care while lowering costs?
Medicare has proposed reducing fees for certain tests and services beginning next year. Will private insurers follow Medicare’s lead? (Presumably they will continue to pay more than Medicare for many services, but in recent years, they have “shadowed” Medicare’s fee schedule. Does this mean that if Medicare lowers fees for certain test by 15%, private insurers will also reduce fees by 15%?
In the end, as the Christian Science Monitor points out: “The CBO report is highly qualified. Any estimates of the impact of such substantial changes in the health insurance and health care sectors must reflect ‘considerable uncertainty,’ the report concludes.
“But,” the paper adds, “the nuances quickly fell out of the political firestorm around healthcare reform.”
Indeed, people looking for “talking points” to buttress their arguments have begun adept at ignoring the complexities of reform. There is much that we don’t know—and can’t know—until we actually enact reform legislation There are many reasons to suspect that reform will reduce the cost of care, but I wouldn’t even hazard a number.
At the same time, I agree with White House Budget Director Peter Orszag that the spiraling cost of care poses the single biggest threat to the U.S. economy. And like Orszag, I believe that we can save billions without affecting the quality of care.
Given those facts, Washington has no choice: it must stand up to those who profit from our bloated money-driven health care system. The alternative is not only the end of the Obama administration, but the end of a great many political careers.
At this point, there is no turning back. Congress has promised affordable, comprehensive healthcare for all Americans. It will have to deliver.
Maggie:
You wrote that the CBO says the extra cost buys better coverage.
Well, of course it does,
That’s why the premium for the individual family fell by $7,300 when the deductible was raised $10,000 (not a bad trade-off).
You also wrote that those darn co-pays were 20-39% of the cost.
That means 61-80% of the cost is covered.
As my rabbi says “Focus on the bagel, not the (donut) hole.
You wrote you agree with Orszag that the spiraling cost of care poses the single biggest threat to our economy.
Please explain how subsidizing the premiums and subsidizing the co-pays and deductibles reduces the cost of coverage.
Is it that with all this coverage fully paid for, we will somehow be that much healthier?
Don Levit
Don–
When co-pays and deductibles are high, a great many people can’t afford to use t heir insurance.
They, and their families, go without needed care.
Other developed countries understand this and do not have high co-pays or deductibles.
The way to cut costs is not to continue to ration by ability to pay. The
way to cut costs is to reduce the amount of unncessary care for Everyone– unnecessary MRIs, angioplasties, bypasses, back surgery, etc. etc.
Don–
When co-pays and deductibles are high, a great many people can’t afford to use t heir insurance.
They, and their families, go without needed care.
Other developed countries understand this and do not have high co-pays or deductibles.
The way to cut costs is not to continue to ration by ability to pay. The
way to cut costs is to reduce the amount of unncessary care for Everyone– unnecessary MRIs, angioplasties, bypasses, back surgery, etc. etc.
Maggie:
Everything I have read about low deductible, low co-pay insurance for the newly insured says that they use substantially more of the services.
Granted, part of the reason is that they are better able to afford the services.
However, you must factor in the psychological, as well as the financial incentives.
When it’s “free,” or very low cost, people buy more products or use more services than they “need.”
Don Levit
Maggie:
When we talk about subsidies, the government provides them out of their general revenues.
Taxes, even earmarked or dedicated taxes, go into the Treasury’s general revenues.
If we assume taxes for Medicare and Social Security consume 30% of the budget, then, 30% of each tax subsidy is used for premiums, co-pays, etc. The other 70% of taxes go to other governmental expenses.
That’s a very expensive way
to subsidize people up to $80,000 of household income – when for every dollar of new tax, only 30 cents go to the “targeted” subsidy.
According to the House Ways and Means Committee, “”The costs of the Social Security program are financed primarily by FICA and SECA taxes. Along with many other forms of revenues, these Social Security taxes become part of the government’s operating cash pool, or what is more commonly referred to as the U.S. Treasury. In effect, once these taxes are received, THEY BECOME INDISTINGUISHABKE FROM OTHER MONIES THE GOVERNMENT TAKES IN. THE TRUST FUNDS THEMSELVES DO NOT HOLD MONEY. SOCIAL SECURITY CHECKS ARE PAID FROM THE TREASURY, NOT THE TRUST FUNDS.
Go to: http://waysandmeans.house.gov/media/pdf/greenbook2003/Section1.pdf.
Don Levit
The cost of Co-pays is dramatically overtated/overrated. 22% of the Claimants are respnsible for 85% of the claims. The majority of Co-pays are for claims under $100. As a carrier I would rateher pay an aditional 3 claims for $100 for 100 people than 1 claim for $100,000.
IBM just cut their co-pay to 0$ for Primary care Doc’s.
Agreed Don, I still can’t see much in the way of reducing health care cost in prospective legislation.
Maybe a lawsuit of two will show us the truth.
http://www.post-gazette.com/pg/09338/1018369-114.stm
I agree that decreasing unnecessary care is important, but I haven’t seen anyone proposing anything in any health reform legislation that would even begin to do that.
Americans DEMAND their unnecessary care. If there’s anything the mammogram blow-up taught the spineless politicians crafting this boondoggle, it’s that you don’t go anywhere near restricting people’s access to unnecessary care.
Pelosi and Co. couldn’t fall over themselves fast enough to come out and declare their everlasting support for demonstrably unnecessary mammograms.
If anything, this episode illustrates to me that putting popularity-seeking politicians in charge of health care will only serve to escalate costs, with little or no attention paid to what is actually effective care.
Alath & Ed, Donald Frist, and Don L.
First, Alalth: If you actually read what the Task Force said–or the Healthbeat posts on mammograms–you would know that the Task Force did NOT SAY THAT MAMMOGRAMS ARE UNNECESSARY FOR WOMEN IN THEIR 40s.
It said that there are risks and benefits, and women in their 40s should talk to their doctors to make a decision that fits their context. For example, women with a family history of breast cancer probably should have mammograms. (I say “probably” only because I’m not an M.D. and so not licensed to give medical advice.)
So of course we want to continue covering mammograms. We just want women know that there are risks as well as benefits–and after weighing risks and benefits some women will decide they don’t want a mammogram..
At the same time, Medicare has annouced that it is slashing fees for MRIs and CT-scans because we know that a great many of them ARE unncessasry.
Past experience shows that if you lower fees and the testing is less lucrative, doctors recommend fewer tests and the volume of testing begins to level off. . Relatively few patients “DEMAND” an MRI–most patients simply go for whatever tests their doctors recommend. Healthcare is driven by the supplier/provider, not by the patient.
ED & ALATH–
On cost-saving in the legislation: Let me quote Profesor Timothy Jost, a well-respected health care expert who writes frqeuntly in Health Affairs:
“Anyone who says that there are no serious cost-saving proposals in the reform bills simply hasn’t read the legislation.”
I realize that most people don’t have the time to read the hundreds of pages of legislation.
But you shouldn’t spread misinformation about something you haven’t read.
They are more than enough people out there talking off the top of their head.
The American College of Physicians Advocate Blog details the many cost-saving measures:
” As Timothy Jost blogs in Health Affairs, [the legislation] actually includes many policies that “will in fact work important changes in the American health care system” to improve health care delivery and lower costs. Among them: accelerated pilot tests of medical homes and accountable care organizations, increased payments for primary care, quality and efficiency incentives for Medicare Advantage plans, comparative effectiveness research, promotion of shared decision-making, gainsharing, reporting on infections acquired in hospitals and ambulatory surgical centers, and workforce initiatives to increase the numbers of primary care physicians.”
The bills also include: financial penalties for an excessive number of preventable hospital readmissions (Medicare will no longer pay for these) promotion of shared decision-making (when patients share in decision-making on elective surgeries, the number of surgeries falls by 20% to 30% , and more— While some of these programs are funded as demonstration projects, a number of them like accountable care organizations and medical homes are authorized as “pilot programs,” meaning that Health & Human Servcies can extend and expand them if they prove successful. (HHS wouldn’t need permission from Congress.
The legislation would also expand health information technology, and, as always, fight waste, fraud, and abuse.
Donald Frist–
Welcome , and thanks for your comment.
Yes, any rational insurer would greatly prefer to cover the co-pay so that patients would go to doctors before they got really sick (or needed hospitalization.)
IBM is smart to require no co-pay for primary care. Pitney Bowes did this long ago (There, the M.D. n charge of the employee health care program was formerly Gerald Ford’s White House doctor.. A very intelligent man.)
The House legislation calls for no co-pays for primary care. (Under the bill private insurers wouldn’t be allowed to charge co-pays for primary care either. And, I think (not postiive) you don’t have to pay down your deductible before going for primary care.)
Don– See Donald Frist’s comment–and my reply.
Also, the medical reserach shows that when co-pays and deductibles stand in the way of going for care, people are just as likely to defer necessary care–and wind up needing much more expensive care down the road.
As for subsidies for families earning up to $88,000–that’s famlies of four earning $88,000, not couples or individuals.
Famlies of four earning $88,000 are still within the statistical middle-class. And, of course, since they’re at the top of the band, they wouldn’t be getting a full subsidy.
Maggie,
The measures you mention as cost-saving or reducing unnecessary care seem very marginal to me. I’ve worked in perinatal medicine for 13 years, and none of these things have the ring of real structural change commensurate with the magnitude of our fiscal problems.
If you look at the big trends – 48.5 million soon to retire, leaving the taxpayer ranks and entering the most health resource intensive periods of their lives, plus rising health care costs – the fiscal sustainability of our health care system seems to me orders of magnitude beyond the kind of peripheral fixes being proposed.
The USPSTF recommendations are far less wishy-washy than you characterize them. The USPSTF did recommend AGAINST routine screening mammograms for women aged 40 to 49 in no uncertain terms. Read it here http://www.annals.org/content/151/10/716.full
This recommendation is well-supported by the evidence. I completely agree with the recommendation. It is not a mischaracterization to say that the USPSTF judged routine mammograms for women in their 40s to be unnecessary – that is the essence of what they said.
The “talk to your doctor” caveat reflects the fact that some women may have individual risk factors or clinical findings such that mammograms would be advised for them. In such a case, this would not be routine screening; it would be an indicated study.
The public outcry agaisnt this recommendation, and politicians’ immediate, ill-informed, pandering response, do not make me sanguine about future efforts to conduct comparative effectiveness research or to implement changes based on the findings thereof.
and, PS, re “demand;”
Maybe patients aren’t demanding MRI’s, but in my field of perinatal medicine there is significant patient demand for unnecessary care. Routine screening ultrasound in pregnancy would never survive cost effectiveness review, but it is certainly in demand from patients. Even above the unnecessary midtrimester screening scan that we routinely do, OB providers face tremendous patient demand for additional unnecessary scans in the third trimester.
I also see a great deal of patient demand for medically unnecessary c-sections, medically unnecessary circumcisions, and medically unnecessary induction of labor.
I do believe that any changes to the health care system that seriously reduce unnecessary care will run up against the wall of angry public outcry, and I just don’t see our political system withstanding such pressure.
Alath-
Your practice must be made up of affluent women.
The poor rarely demand anything
The patients likely to ask for a specific test or procedure are wealthy, well-educated and with a certain sense of entitlement.
They represent a fairly small fraction of all patients.
Most patient don’t try to tell the doctor what to do; they do (or try to do) what the doctor tells them they should do.
Medicine is supply-driven, not demand-driven. Much research has been done on this topic.
Guess again. I work for an FQHC (federally qualified health center). My patients are anything but affluent.
I would be very interested to read your study that documents the absence of patient demand for elective induction, elective c-section, and unnecessary ultrasounds in a low income public health perinatal setting. Such a finding would be totally contrary to my experience.
It’s out of my specialty, but from personal experience I do agree that a lot of excessively aggressive end-of-life care is provider driven. Providers don’t always do a good job of laying out what treatments for the terminally ill will really accomplish, or offering humane alternatives to an aggressive ICU death. I was very sorry to see end-of-life counseling get dropped like a hot potato as soon as it came under political heat. Come to think of it, that’s another example of underwhelming political leadership.
Alath–
Your experience seems to be unusual. Here are the
stats: “Women of higher socioeconomic status are more likely to have a c-section, 22.9%, compared to 13.2% of women who live in low-income families”
Alath–
Your experience seems to be unusual. Here are the
stats: “Women of higher socioeconomic status are more likely to have a c-section, 22.9%, compared to 13.2% of women who live in low-income families”
Maggie, you are confounding patient demand versus care rendered. These are not the same thing. Your stat is also looking at the overall c-section rate, not the rate of elective c-sections.
My basic point is that any attempt to limit care based on cost effectiveness is likely to be unpopular with patients and generate negative poltical feedback, which our leadership does not seem to withstand well.
Imagine that tomorrow, a national cost-effectiveness panel released a report on routine screening ultrasound in pregnancy. Based on the very abundant evidence that routine screening u/s does not improve outcomes, the panel would surely recommend that obstetric ultrasound be reserved solely for cases where there is an indication.
According to your understanding of patient demand, the vast majority of American women would meekly submit to this recommendation and relinquish their routine ultrasounds, finding out what their babies look like, and forego the knowledge of whether to buy blue or pink, with nary a peep of protest. Only a tiny handful of highly affluent women, you say, would dare to raise any objection.
Could you please tell me what planet you are talking about? Because it’s not this one.
I’m telling you, based on many years of clinical experience, that any such panel recommendation would be enormously unpopular. There would be howls of angry indignation from pregnant women everywhere. If I tried to follow this recommendation, I would be in a major fight with every patient I saw all day long. And I have no doubt whatsoever that Nancy Pelosi (or her Republican equivalent if the electoral map were to change) would instantly rush out in front of the cameras, promising new legislation to guarantee an unnecessary ultrasound to every pregnant American woman.
I do think we need cost effectiveness review throughout the medical system. I just don’t have any faith that our political system is capable of implementing it in the face of patient/voter demand.