Paul Krugman v George Will Battling over what the CBO Report did and didn't say about Premium Increases/Savings.
The above is a reprise of a similar discussion between President Obamaa and Sen Lamar Alexander during the Health Care Summit - but the sad part is that everyone is still getting it wrong.
Transcript via Krugman's Blog
WILL: By the millions. Now -- second, now, Paul says that, in fact, the Republicans have no ideas. They do, cross-selling across state lines, tort reforms, all those. Just a second, Paul. Then you say they're telling whoppers. That was your view about Lamar Alexander when he said, for millions of Americans, premiums will go up. You said in the next sentence in your column, I guess you could say he wasn't technically lying, because the Congressional Budget Office says that's true.
KRUGMAN: No, it's not what it says.... Can I explain? This is...
WILL: Wait. Let me -- let me set the predicate here, because you then go on and say the Senate does say the average premiums would go up, but people would be getting better premiums.
KRUGMAN: Look, let me explain what happens, because you actually have to read the CBO report.... [T]he CBO report tells you... that... what the bill will do is bring a lot of people who are uninsured, who are currently young and therefore relatively low cost, into the risk pool, which will actually bring premiums down a little bit. It will also... lead a lot of people to get better insurance... people who are currently underinsured, who have insurance policies that are paper thin and don't actually protect you in a crisis, will... get... full coverage. That makes the average payments go up, but it does not mean that people who currently have good coverage under their policies will pay more.... [T]hey'll end up paying a little bit less.
WILL: One question. If the government came to you and said, "Professor Krugman, you have a car. We're going to compel you to buy a more expensive car," but it's not really more expensive, because it's a better car, wouldn't you tell them to get off your land?
If the Car you already have is the one that's up on blocks in your front yard because it won't run and you're still paying for it - and you're government is telling you have can have a car that actually works for only slightly more, I think you'd take it.
The end problem here though is that ultimately both of them are actually partially wrong about what the CBO Report PDF ultimately says about the impact of the Senate Plan on Premiums, because I actually did read it and surprisingly it's in English - not Khazack - also it's only 29 pages long, not 2,700.
Summary of Findings
The effects of the proposal on premiums would differ across insurance markets (see Table 1). The largest effects would be seen in the nongroup market, which would grow in size under the proposal but would still account for only 17 percent of the overall insurance market in 2016. The effects on premiums would be much smaller in the small group and large group markets, which would make up 13 percent and 70 percent of the total insurance market, respectively.
Nongroup Policies CBO and JCT estimate 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. 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.
Ok, here's the run down - 70% of those insured, those employed by large companies, would see no significant premium change. Another 13% of insured, those working at small companies, wouldn't see any significant premium change either. That's 83% that doesn't change.
The remaining 17% are where thing change dramatically. A lot of those people don't have insurance right now, or have insurance they can't use due to either pre-existing conditions, high deductibles or recission (Car up on blocks). Most of those people will see their costs go down about 7-10%, but that savings is balanced against the increase for those without coverage or broken coverage (+24%) - the net average is an increase of 10 to 13%, however that's only true if you completely ignore the impact of the subsidies provided to people making up to 400% of the poverty level.
How much better would it be for them? Well, the kind folks at CBO were gracious enough to make a table to answer that exactly that question:
Differences in Average Premiums Relative to Current Law due to: | Individual | Small Group | Large Group |
Difference in Amount of Insurance Coverage | +27 to +30 | 0 to +3 | Negligible |
Difference in Price of a Given Amount of Insurance - Coverage for a Given Group of Enrollees | - 7 to - 10 | - 1 to - 4 | Negligible |
Difference in Types of People with Insurance Coverage | - 7 to - 10 | - 1 to +2 | 0 to - 3 |
Total Difference Before Accounting for Subsidies | +10 to +13 | +1 to - 2 | 0 to - 3 |
Effect of Subsidies in Nongroup and Small Group Markets - Share of People Receiving Subsidiesd | 57 | 12 | n.a. |
For People Receiving Subsidies, Difference in Average - Premiums Paid After Accounting for Subsidies | - 56 to - 59 | - 8 to - 11 | n.a. |
The government required car that works would be an average of 56-59% cheaper than the clunker on your lawn, once you factor in the subsidies.
Wanna see that again in real dollars, not percentages? - CBO did supply:
Average premiums per policy in the nongroup market in 2016 would be roughly $5,800 for single policies and $15,200 for family policies under the proposal, compared with roughly $5,500 for single policies and $13,100 for family policies under current law.
Those figures indicate what enrollees would pay, on average, not accounting for the new federal subsidies. The majority of nongroup enrollees (about 57 percent) would receive subsidies via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium, CBO and JCT The weighted average of the differences in those amounts equals the change of 10 percent to 13 percent in the average premium per person summarized above, but the percentage increase in the average premium per policy for family policies is larger and that for single policies is smaller because the average number of people covered per family policy is estimated to increase under the proposal. The effects on the premiums paid by some individuals and families could vary significantly from the average effects on premiums.
Average premiums per policy in the nongroup market in 2016 would be roughly $5,800 for single policies and $15,200 for family policies under the proposal, compared with roughly $5,500 for single policies and $13,100 for family policies under current law.4
Those figures indicate what enrollees would pay, on average, not accounting for the new federal subsidies. The majority of nongroup enrollees (about 57 percent) would receive subsidies via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium, CBO and JCT The weighted average of the differences in those amounts equals the change of 10 percent to 13 percent in the average premium per person summarized above, but the percentage increase in the average premium per policy for family policies is larger and that for single policies is smaller because the average number of people covered per family policy is estimated to increase under the proposal. The effects on the premiums paid by some individuals and families could vary significantly from the average effects on premiums.
So instead of paying $5,800 - those receiving subsidies would pay about $1,900 as individuals and families would drop to about $5000 instead of $15,500 per year.
I think that's pretty affordable, but I know what you're probably saying right now - "Wouldn't that savings be even better with a Public Option?"
No, according to CBO it actually wouldn't because there actually is a Stealth Public Option already in the plan.
From the CBO Director's Blog
Effects on Health Insurance Premiums
On November 30, CBO released an analysis prepared by CBO and JCT of the expected impact on average premiums for health insurance in different markets of the as originally proposed. Although CBO and JCT have not updated the estimates provided in that letter, the effects on premiums of the legislation incorporating the manager’s amendment would probably be quite similar. Replacing the provisions for a public plan run by HHS with provisions for a multi-state plan under contract with OPM is unlikely to have much effect on average insurance premiums because the existence of that public plan would not substantially change the average premiums that would be paid in the exchanges. The provisions contained in the manager’s amendment to regulate the share of premiums devoted to administrative costs would tend to lower premiums slightly, and the provisions prohibiting the imposition of annual limits on coverage would tend to raise premiums slightly.
During the push to expand Medicare to those older than 55 which was defeated by Joe Lieberman, an alternative to the Public Plan was offered where the Office of Personnel Management - the same Office that currently handles Federal Employee Benefits - would contract a Non-Profit Insurance Plan to the Public. This plan would actually go into effect far sooner than the House's Public Option which is dependent on the Exchanges and won't come online until 2014.
That plan saves as much as the Public Option as was also reported by Talking Points Memo.
The CBO has concluded that, on average, premiums will be the same as they would have been if the Senate had the public option, but that the public option saved the federal government more money by putting downward pressure on the premiums of low-cost private plans, which will be heavily subsidized.
The bill remains a big deficit slayer--$132 billion in the first 10 years. Over the next 10 years, CBO warns all estimates are very uncertain. But here's a key conclusion: "CBO expects that the legislation, if enacted, would reduce federal budget deficits over the ensuing decade relative to those projected under current law--with a total effect during that decade that is in a broad range around one-half percent of GDP."
Senior Democratic aides are suggesting that the bill could reduce the deficit, compared to deficits projected under current law, by as much as $1.3 trillion.
In short, the PO would have saved a bit more money in the deficit - but not neccesarily on premium costs which would largely the same for most people (83%), a few people (About 8%) will see a slight increase and about 9% will see a significant cost savings (up to 59%) and be able to purchase insurance they simply can't get now.
See, it's not that complicated - and I didn't need a slide-rule, Cray Super-Computer or a Nobel Prize in Economics.
Vyan