Obamacare

Empty Promises, Redux

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Are the administration's promises about the new health care law empty? Ezra Klein offers a series of rejoinders to some of the points that I made in my article examining promises made about the new health care law.

For example, I wrote that the president's promise that the bill would cost "around $900 billion" was undercut by the fact that, in addition to the $940 billion official score, the CBO later added $115 billion in discretionary spending. Klein responds that the bulk of that spending—about $86 billion—is not new spending. I'd make two points about this: First, part of the question is how we define what constitutes the cost of the law. Is it the cost of the new spending? Or is it the full cost to get it up and keep it running over ten years, regardless of whether that spending is new? Typically, when we think about a new program, or a replacement program, we think about its entire cost, even if some of that cost already existed. If it's the full cost, then the entire $115 billion figure is fair game. But let's say it's not, and we only add $29 billion to the official $940 billion price tag. We still end up with a $969 billion total. Calling that "around $900 billion" is, at the very least, a stretch. (It's also worth noting that the $940 billion price tag only covers the cost of the coverage provisions.)

As for the price of insurance, Klein points to the CBO's projection that premium prices in the individual market will go down. But as I noted in a post linked from the article, the price most consumers will pay only goes down after you factor in subsidies. The average pre-subsidy price, though, is going to rise, and if you accept the the CBO's projections, nearly half—about 43 percent—of those in the individual market won't get subsidies. According to the CBO, the rise will result from a combination of new mandatory benefits and individuals choosing to buy more expensive plans thanks to the subsidies. The total rise is estimated to be between 27 and 30 percent, but that rise would be partially offset by 1) rule changes in the non-group market and 2) an expected increase in the number of younger, healthier individuals buying insurance. The end result, according to the report: "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." Klein's argument that people are getting extra benefits in exchange for the higher premiums  ignores the question of who pays for the subsidies—ie: taxpayers, including, over time, some of the taxpayers who take the subsidies. So those benefits aren't free. And as I've said before, mandatory new benefits may or may not provide value to the folks getting them, but they definitely impose new costs.

What about the employer market? Klein says that the CBO "reported that costs in the employer markets, which serve 150 million, would go down slightly." But that's not quite right. Rather, the CBO projects very little change—possibly, as he says, a slight drop (about 2 percent) or, as he doesn't mention, a very slight hike (about 1 percent). Either may well turn out to be true. But many employers, at least, believe the law will ultimately result in higher health costs—and not without any reason, either.

Klein agrees with me that the administration engages in double-counting when it claims the law extends the solvency of Medicare. Which is important, because the claims made by the administration that Medicare is healthier as a result of the PPACA rely on a combination of double counting and cuts to Medicare advantage. But as to whether the law ultimately puts the program on better fiscal footing, he raises the question of whether IPAB—the new Medicare cost-control board—will be effective. He points to his column on why the GOP ought to stop opposing the board. I agree with Klein that a lot of the Republican rhetoric about the board is overblown. It's not a government takeover, nor is it likely to directly lead to one. But as I wrote earlier today, given its limitations and the political challenges it faces, I'm not terribly convinced it will lead to the cost-savings supporters hope for. And neither, for that matter, are CBO head Doug Elmendorf or Richard Foster, Medicare's chief actuary. But no matter what, the administration's specific claim that the law extends Medicare's solvency by 12 years is based on double counting, and incorrect.

Klein also takes issue with my argument that the law is paid for mostly by raising new revenue—i.e., by raising taxes—rather than by shifting around existing spending; according to the CBO, the law increases taxes by $525 billion over the next decade. Klein argues that I'm suggesting "that we're not spending money on the tax exclusion for employer-provided health insurance." He explains:

Most analysts put that tax break at about $250 billion a year, and the excise tax begins to pare it back. In effect, that's taking money from a federal subsidy for employer-provided insurance and putting it into health-care reform and deficit reduction, just the same that cutting Medicare Advantage reimbursements shifts money from subsidizing private insurance in Medicare and puts it towards health-care reform.

That's one way of thinking about it, but I don't think it's a common one. Klein is reframing the $250 billion that we would be collecting if we taxed employer insurance as "spending." But it's not. It's money that the government doesn't collect, which isn't the same thing. To think of it as Klein does, we'd have to think of every business tax break or personal deduction as a form of government spending. But I don't think most people do. That also reframes the excise tax—the mechanism used to collect some of that $250 billion—as, well, not a tax. That's probably not the most obvious way to think about it, although his post implies it is.

Moreover, the excise tax doesn't actually start the process of ending the tax subsidy for employer health care, as Klein says. Instead, it touches expensive plans that cost more than an arbitrary amount with a tax rate that is higher than either the corporate or personal income tax rates.

As a wrap up, Klein argues that a key difference between critics and supporters of the law is that critics think it's all bad, "all the promises are lies, etc." In fact, I think very, very few (and perhaps none) of the promises made about the law were lies, which is why I didn't use the word in the piece. Instead, I get the sense that the various promises represent a combination of overly optimistic thinking, exaggeration (some intentional, some not), and, mostly, the desire to sell the public on what the law's backers ultimately believe will be beneficial while papering over some of the law's messier political compromises.

NEXT: If They Can Spy on Crystal Bowersox, How Can The Rest of Us Feel Safe?

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  1. This raises the question: why are you (or anyone for that matter) reading Ezra Klein?

    1. Isn’t Annie Lowrey dating Ezra Klein? Didn’t Peter appear with Annie Lowrey on Bloggingheads recently?

      https://reason.com/blog/2010/09…..nt_1897922

      1. Yes it is a huge fucking sick love triangle.

        Annie and Ezra both want to fuck Peter and peter wants to get into all the cool Jurnolist cocktail parties.

        Note to reason magazine: I could have had a fulfilling wonderful life without ever know who Annie and Ezra are….Thanks for fucking ruining it.

        1. I’d whore myself out to Annie, but Ezra? You’re a sick, sick bastard, Suderman. I’d rather fuck sheep.

          1. Or a Komodo dragon? Because Klein sure looks like a lizard.

            1. If Ezra Klein’s tail falls off, does he grow another one?

          2. You sound like my kind of guy!

      2. I don’t think I could possibly care any less which cat-loving liberal women has so lowered her standards to date someone like Klein.

        1. They are adults and they are dating…

          seriously would you date a woman so stupid that she thought throwing money out of helicopters was a good idea?

          I suspect you would fuck her and dump her. I do not think her standards are all that low….She is simply low standard and dating at that standard.

          1. Maybe five years ago I’d hit it and quit it, but at this point in my life it isn’t worth it if I have to listen to her talk. Dirty hippies + possibility of bedbugs due to poor hygiene= no fucking way.

            Maybe if she was in to getting deloused and having her mouth covered in duct tape, sure.

            1. Maybe if she was in to getting deloused and having her mouth covered in duct tape, sure.

              Kinky!

  2. Are the administration’s promises about the new health care law empty?

    Is the Pope Catholic?

    1. Statist apologists explain warm yellow liquid is actually rain, film at 11:00.

  3. The Federal government is spending 65% of my income because it only hits me with a 35% tax? Egad.

  4. Klein is reframing the $250 billion that we would be collecting if we taxed employer insurance as “spending.” But it’s not.

    Think of it Klein’s way: The default ownership of each dollar is the government’s. For you to end up with that dollar (regardless if you “earned” it) would necessitate the government (foolishly) spending that dollar on you. It’s why government always has to fret how they’re going to pay for a tax cut.

  5. More important, did he ask Klein what little Annie’s pooner smells like.

    1. I’m gonna guess she’s a beard and Klein has no desire to even see her naked, let alone sniff her pooner

    2. She’s only 24 or 25. She’s an idealist who thinks that cable tv, a car and english lessons being cost prohibitive is desirable. In reality, her commute to work on public transit is 80% or more white, she uses ZipCar every weekend to take road trips, and she thinks that an $8 salad with a $5 glass of wine while watching a VH1 Celebreality Show is a frugal dinner choice. Also, her favorite pose in photos is jumping in the air, kicking her legs behind her, while putting her hands in the air, in front of a landmark/mountain in a foreign country.

      1. To conclude, she smells like a hidden mountain meadow. She tastes like a spoonful of hydrochloric acid.

      2. Dear God, you’ve just described my Masshole brother-in-law and his girlfriend.

        Well done.

  6. I have all the faith in the world Klein will balance our budget and reduce health care costs rhetorically.

    Mean while in the physical world the budget will not be balanced and our health care costs will skyrocket.

  7. Wow, OK this is what I am talking about.

    http://www.real-anonymity.es.tc

  8. To think of it as Klein does, we’d have to think of every business tax break or personal deduction as a form of government spending. But I don’t think most people do.

    That’s right. But we do think our tax refunds are. Thank you, Uncle Sugar!

  9. Did you guys see this crap:

    http://news.yahoo.com/s/ap/201…..ce_warning

    President Barack Obama’s top health official on Thursday warned the insurance industry that the administration won’t tolerate blaming premium hikes on the new health overhaul law.

    “There will be zero tolerance for this type of misinformation and unjustified rate increases,” Health and Human Services Secretary Kathleen Sebelius said in a letter to the insurance lobby.

    “Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections,” Sebelius said. She warned that bad actors may be excluded from new health insurance markets that will open in 2014 under the law. They’d lose out on a big pool of customers, as many as 30 million people nationwide.

    Get that?

    What is happening here?

    1. >What is happening here?

      When all the insurance companies are out of business you will be begging them for single payer. It’s exactly what they planned, and exactly what you were told would happen.

      1. Yes, I knew that was the plan, as did many others. But no, that is not what people were told.

    2. What. The. Fuck.!?!?!?!?!

      That may be the most egregious example of government intimidation I’ve seen out of the Obama Administration to date. And that’s saying something from this group.

      1. I’m assuming they’re claiming to be punishing them for fraud/false advertising/whatever, not merely for disagreeing with the administration.

        Of course, it’s only false advertising if it’s not true, which is something I’d love the administration to have to prove in court.

        1. Not really. Any “unjustified rate hike” blamed on the legislation will get the insurer in trouble. And who decides if the rate is unjustified?

          Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers. We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014.

          So the government, which is far from an impartial third party, will decide if the rate hikes are unjustified – and punish insurers accordingly.

          And what criteria will be used to decide if the rate hike is unjustified?

          According to our analysis and those of some industry and academic experts, any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal. We estimate that that the effect will be no more than one to two percent.

          and

          By making sure insurance covers people who are most at risk, there will be less uncompensated care, and, as a result, the amount of cost shifting to those who have coverage today will be reduced by up to $1 billion in 2013. By making sure that high-risk individuals have insurance and emphasizing health care that prevents illnesses from becoming serious, long-term health problems, the law will also reduce the cost of avoidable hospitalizations. Prioritizing prevention without cost sharing could also result in significant savings: from lowering people’s out-of-pocket spending to lowering costs due to conditions like obesity, and to increasing worker productivity ? today, increased sickness and lack of coverage security reduce economic output by $260 billion per year.

          Get that? You insurers better use OUR guesses about cost increases instead of your own, and you better use our phony baloney promises of lowered costs, too.

          1. Also, look at the dumb as a fucking rock reasoning behind this:

            By making sure insurance covers people who are most at risk, there will be less uncompensated care, and, as a result, the amount of cost shifting to those who have coverage today will be reduced by up to $1 billion in 2013.

            Don’t you see? It’s brilliant! By forcing insurance companies to cover the high risk uninsured, who would normally be subsidized by people with insurance via more expensive hospital bills, we eliminate cost shifting!

            Instead, the insurance company will pay those bills, the money for which will come from… increases to premiums for existing healthy insured… shit.

            OK, scratch that last sentence, and we’re good to go.

    3. He’s feckless. No surprise here. He’s a politician.

    4. “Simply stated we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide lots of expensive care to a lot of sickly people who couldn’t afford insurance if it was priced according to risk.”

      There, FIFY

  10. I get the sense that the various promises represent a combination of overly optimistic thinking, exaggeration (some intentional, some not), and, mostly, the desire to sell the public on what the law’s backers ultimately believe will be beneficial while papering over some of the law’s messier political compromises.

    The final two of those three categories — intentional exaggeration and omission — are called lies where I come from.

  11. Klein is reframing the $250 billion that we would be collecting if we taxed employer insurance as “spending.” But it’s not. It’s money that the government doesn’t collect, which isn’t the same thing. To think of it as Klein does, we’d have to think of every business tax break or personal deduction as a form of government spending. But I don’t think most people do.

    Gotta love the “most people don’t think that way so it must be false” argument coming from a libertarian.

    But more seriously, tax cuts have the same immediate effect on the deficit that spending increases do. They’re not the same thing, but as far as the immediate impact on the deficit is concerned, they are.

  12. I just recently incorporated and set up a high deductible medical plan. Before I even had the new id card in hand I got a letter from the provider saying that they had applied for an increase for next year (ie, Oct 11) of 33%.

    Hey thanks Obama! I mean.. my old plan only could manage to do 15% a year and you more than doubled that rate!

    1. I know I promised hope AND change, but 1 out of two ain’t bad. Plus, I’m historic, so let’s call it 2 out of 3.

  13. I love how $940 billion is ‘around’ $900 billion. I mean, ok, from a percentage standpoint, it is, but how in the fuck is $40 billion goddamn dollars not an important and huge sum of money?

    Stupid fucks. Even MSNBC is now saying that Obama is a lying sack (sort of).

  14. From watching the blogging heads video and reading this i am getting how naive Ezra and Annie are.

    They honestly feel that Obamacare is going to work. That the layers and layers of bureaucratic mess which it is will somehow make health care less expensive. And they make this assumption in 2010.

    It is not as if Social Security is not going bankrupt this year, or that medicare and Medicaid are not on a collision course with budget busting disaster or that the dikes held during Katrina, or that k-12 test scores after the department of education was formed have not fallen, or that the war on drugs has not been a nightmare, or the Tennessee valley authority works, or that Fanny and Freddy did not destroy our economy….the list goes on.

    There is not one national federal initiative that has worked. The only two i can think of that come close are the civil rights act, which has worked for the most part but we still have lingering bullshit not the least of which is in 2010 Ezra still calls small government populists racists for political points. The other is our military. Yes we won the cold war and yes we won ww2 but even today it is incapable of winning an asymmetrical war. Though that is not necessarily a bad thing.

    It is as if they are incapable of seeing when government fails…let alone adopt to those failures.

    It is too bad…they are both young…but i have my doubts they will fair well when Obamacare fails….and will toil for the rest of their lives defending it no matter how disastrous it is.

    1. I see a couple serious misstatements in this post.

      1. Fanny should be Fannie.
      2. Freddy should be Freddie.

      That is all……

      1. So, is it “tranny”, or “trannie”?

        1. Dunno. I just thought they were dudes in dresses.

          NTTAWWT.

    2. Naive or stupid are good words. You have to remember that Klein and Annie have never done anything except gone to school and pontificated in Washington. So, they have no real experience with bureaucracies. So they honestly think things will work as planned.

      It almost (repeat almost) makes me think we should bring back the draft. If dumb shits like Klein and Annie had to deal with the giant, cruel, incompetent, succeeds in spite of itself military bureaucracy, they would be less likely to think stupid shit like this in the future.

      It really is a case of two over grown children being clever. And of them knowing absolutely nothing about how the world actually operates. Why anyone bothers to read or pay attention to what these people have to say is beyond me.

      1. They are not stupid people, John. They both are actually quite clever. The fact that they respond to arguments that bureaucracies never work out as planned with recycled talking points — rather than researching the history of these things in the hope of finding evidence supporting their side — shows that they are WILLFULLY IGNORANT of how things in the real world work.

        1. Willfully ignorant is a good way to put it. They are more in love with their prejudices and ideology than they are with the truth

  15. “exaggeration (some intentional, some not)”

    I don’t know about you but where I come from Intentional exaggeration with the intent to misinform is FUCKING LYING! You know X to be true but you say Y is infact the answer to manipulate the outcome by the people to make a decision based on reality. IT IS FUCKING LYING!

    1. Yes it is lying. And the people who put out this bullshit need to either admit to being liars or having an IQ below 100. Either way, no one should ever again take them seriously.

    2. Exactly what I said. Ditto for “papering over” the problems with the law — that’s a sin of omission.

  16. This is a very knowledgeable and fair piece. I thank Mr Suderman for staying on top of this so well.

    Hey, Ezra Klein went to high school, college…was one of the first bloggers at a political campaign…

    …what hasn’t this kid done?

    1. Yeah, he has succeeded at every level, except the real world.

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