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Ezra Klein, Defender Of Free-Market Economagic Health Care Myths

Ezra Klein attempts to rebut Jane’s reasons for opposing the bill. Many of his arguments are weak at best. For example he says about the excise tax:

“You” probably don’t have these plans, which are tilted towards the rich, not the middle class. Your plan probably doesn’t cost more than $23,000 a year. And if it does, the only part that gets taxed is the part in excess of $23,000 a year. The average family health-care plan costs about $13,500 — almost a full $10,000 less than the plans this policy taxes. If we don’t manage to slow the growth in health-care costs, this policy will, over time, hit plans that are less generous. But economists consider the excise tax, which functions as a tax on insurers who let premiums grow too quickly, one of the most effective cost-control mechanisms in the bill.

Klein is doing a disservice by trying to downplay the effect of having this excise tax not properly indexed. In the first year, it will hit very few plans, but over time, it will quickly grow. By 2016, the CBO says it will affect 19% of people with employer-provided health insurance (roughly 30 million Americans):

Specifically, an estimated 19 percent of workers with employment-based coverage would be affected by the excise tax in that year. Those individuals who kept their high-premium policies would pay a higher premium than under current law, with the difference in premiums roughly equal to the amount of the tax. However, CBO and JCT estimate that most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums; those reductions would result from choosing plans that either pay a smaller share of covered health care costs (which would reduce premiums directly as well as indirectly by leading to less use of covered medical services), manage benefits more tightly, or cover fewer services.

By 2019, it would affect the health insurance of roughly 58 million. When Klein says “economists” believe it is “one of the most effective cost-control mechanisms in the bill,” he clearly is not referring to the professional actuaries at CMS who think it will only reduce national health expenditures by 0.3% by 2019:

We estimate that, in aggregate, affected employers would reduce their benefit packages in such a way as to eliminate about three-quarters of the current excess benefit value. The resulting higher cost-sharing requirements for employees would have an initial, significant impact on the overall level of health expenditures. Moreover, because health care costs would generally increase faster than the CPI plus 1 percent, we anticipate additional, incremental benefit coverage reductions in future years to prevent an increase in the share of employer coverage subject to the excise tax. These further adjustments would contribute to a small reduction in the growth in health care expenditures for affected employees through at least 2019.16 In 2019, these impacts would reduce total NHE by an estimated 0.3 percent.

Klein said it is critical to have this excise tax provision, but he is critical of Jane for demanding that drug re-importation–which is likely to produce even greater reductions in NHE–be part of the bill. A public option would also likely produce an equally large reduction in NHE?

Klein also uses some very dubious data to defend the myth that this bill will really bend the cost curve.

It’s not even clear what this is supposed to mean. According to the Congressional Budget Office, this bill reduces the average cost of premiums by a little bit for most people, and a ton for the people the bill directly affects. According to the Center for Medicare and Medicaid Services, the bill cuts spending in the long term.

The CBO analysis only said premiums for people with employer-provided insurance will change by an average of -3 to +1 in 2016. Part of that is that roughly 19% of those people would be forced into plans with lower premiums, but higher out-of-pocket costs. Harry Reid also temporarily removed the ban annual limits (which he has since reinserted) to possibly make this CBO report on premiums appear better.

Finally, contrary to what Klein claims, the CMS does not say the bill would reduce NHE. The CMS says the bill would increase NHE by 0.7% in 2019, which is as far as their analysis looks into the future. Klein links to a story where someone takes the CMS numbers and tries to extrapolate another decade into the future. This is questionable at best, and if the goal was to “bend the cost curve,” clearly, the possibility that it might come down slightly in distant future is pretty much a failure.

This bill is making huge concessions the the medical-industrial complex. It would funnel billions of taxpayer dollars to this complex, and force millions of people to become customers of the private health insurance industry. This is the best chance we have to exert maximum leverage for real reform. If we cannot get more now, I don’t see how the fight becomes easier after enriching, empowering, and further entreching the powerful special interests that killed real reform this time around.

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at http://pendinghorizon.com

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