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Paul Ryan's Dubious Claim That the GOP Health Care Bill Would Reduce Insurance Prices

The House Speaker omits key information when he says the CBO confirms that the AHCA would make coverage more affordable.

Like Clarissa, Paul Ryan explains it all. Tom Williams/CQ Roll Call/NewscomOn Monday, after the Congressional Budget Office (CBO) released its score of the American Health Care Act (AHCA), which would partially repeal Obamacare and replace it with a new system of insurance subsidies, Speaker of the House Paul Ryan said that the CBO report "confirms that the American Health Care Act will lower premiums" and tweeted a graphic indicating that the bill would lower premiums by 10 percent.

The problem with Ryan's claim is that it doesn't tell the whole story. Instead, it relies on downplaying or overlooking key aspects of the CBO's premium estimates. Indeed, the CBO provides reason to believe that the most immediate and significant effect of the AHCA will be to raise insurance premiums.

When Ryan says that the CBO report confirms that the House bill will lower premiums, he's not talking about what would happen right away. He's referring to the budget office's projections for what happens after 2020. Starting in the next decade, the agency says that increased premiums would be offset by several factors, and by 2026 would result in individual premiums that are, on average, 10 percent lower than under the current law trajectory.

So Ryan's argument is that CBO's estimates confirm that the AHCA would lower premiums in the long run. But even that doesn't tell the whole story, and there are a number of caveats and qualifications needed to understand the CBO's numbers.

The first is that the 10 percent lower figure is a relative estimate, judged against the current law baseline extended out into the future. CBO is saying that premiums would be 10 percent lower than they would otherwise be a decade from now, with a decade's worth of price hikes built in—which is not at all the same as 10 percent lower than premiums are today.

The second is that a big part of why premiums would be lower is that the federal government would be picking up part of the tab. One of the reasons why CBO predicts that premiums would fall for consumers is that it expects that states would use a $100 billion pot of new federal funding called the Patient and State Stability Fund to help cover extremely high cost enrollees, basically removing them from the rest of the insurance pool. The effect, as Cato Institute Health Policy Director Michael Cannon wrote this week, would be to "hide a portion of the full premium by shifting it to taxpayers." It's effectively a second layer of subsidies in addition to the refundable tax credit the AHCA would already provide to people buying coverage on the individual market.

Another thing to remember is that the 10 percent relative decrease is an average. It's not an across the board reduction. And the benefit would go almost entirely to younger and healthier people—while older people would actually be charged quite a bit more.

To understand why, recall that Obamacare includes what's known as an age rating provision, which limits insurers from charging an older person more than three times what a younger person is charged. The result is to compress rates, meaning that younger and healthier people pay more and older and sicker people pay less. The Republican plan would keep the age rating rule in place but expand it to allow insurers to charge older people up to five times what they charge young adults. So younger people would pay less, and older people would pay more. According to CBO, "premiums in the nongroup market would be 20 percent to 25 percent lower for a 21-year-old and 8 percent to 10 percent lower for a 40-year-old—but 20 percent to 25 percent higher for a 64-year-old." The point is that the 10 percent overall decrease wouldn't be a decrease for everyone.

So when Paul Ryan says that the CBO confirms that the AHCA would lower premiums, what he's actually referring to is the CBO's projection that the law would lower premiums for younger people, in part by funding a new federal backstop for the insurance market, on a relative basis, a decade from now.

Just as important is what Ryan doesn't say, which is that in the meantime, the CBO report projects that premiums would rise as a result of the AHCA.

In 2018 and 2019, premiums in the individual market would be 15 to 20 percent higher than under the current trajectory. Most of the increase would come as a result of the law's elimination of the penalties associated with the individual mandate. Without those penalties in place, the CBO expects that younger and healthier people will decline to purchase insurance, leaving a smaller, sicker insurance pool—and making premiums more expensive. The CBO, in other words, is projecting a significant premium increase in the years before the reductions kick in.

All of the CBO's estimates should, of course, be regarded with some skepticism. The budget office has a history of missing the mark on projections related to health care legislation. But the short-term premium hikes the CBO expects should be regarded as more likely than the longer-term decreases, because projections tend to become less accurate and reliable the further they extend out into the future.

In any case, if Ryan is going to declare that CBO's projections confirm the merits of the legislation he's trying to pass, then it's worth understanding what the CBO is really saying about the AHCA's likely effect on health insurance premiums, which is that premiums would go up for several years before falling, maybe, for some people.

Tellingly, other Republicans seem to have taken a rather different message from CBO's report.

Asked about the bill yesterday, Texas Senator Ted Cruz worried that the "most troubling aspect" was the CBO's projection of higher health insurance premiums. "This is not the mandate that we were elected to fulfill," he said, according to the Dallas Morning News. "The test of success will be a year from now, two years from now, three years from now: Is health care more affordable?" Under the House Republican plan, the CBO states quite clearly that it won't be.

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  • american socialist||

    Amuses me how pols use the cbo when it is what they like to heat but then ignore when it doesn't or say it is wrong

    Now obviously the cbo, trump obama etc or other things in general arent always right and arent always wrong...or you can support somethings while thinking others are bad

    so there doesnt need to be an all or nothing. You can cherry pick i think if and only if you can elaborate and substantiate why you think x is right or agree and or why show y is wrong or dont agree

  • american socialist||

    Note: not saying ryan did last two paragraphs here. He seems like a typical pol just using what he wants to hear and ignoring what does not

  • american socialist||

    Without saying why or how

  • Fascist loofa-faced shitgibbon||

    The main point is, it doesn't matter if a plan is more or less expensive, or results in more or less people insured.

    What matters is that the FEDGOV has no business in the business.

  • DarrenM||

    What matters is that the FEDGOV has no business in the business.

    That's not the way it works anymore. The FEDGOV has business if it decides it has business.

  • Mickey Rat||

    I am sceptical of anyone using the CBO projections as definitive for anything. Their premises seem faulty, as they seem to have to take as a given that government interventions work as the legislation's authors claims it will (which tends to weight statist legislation favorably).

  • american socialist||

    Yea and the cbo is based this assessment off of their aca projections they have which aren't likely close

  • Paulpemb||

    Didn't the CBO eventually give up on even trying to score the ACA, when Obama kept changing aspects of the law on his own whim?

  • mashed potatoes||

    i feel like the only real way to decrease healthcare costs is reforming the FDA and seriously deregularion, mainly licensing reduction, in the medical field. let walmart have a clinics along side their eyecare centers

  • american socialist||

    Agreed

  • american socialist||

    I think the gop does this perhaps they are smarter than i give credit for (just politics not fix necessarily)

    Give a bill that appears to want to fix. It goes nowhere doa. Aca continues to implode and gop now has cover for the dem screw up by saying they tried to fix but dems stopped it.

    Makes reform easier i think

  • Diane Reynolds (Paul.)||

    happens after 2020. Starting in the next decade

    That's kind of a dramatic way of talking about something that happens a couple of years from now.

    It's not an across the board reduction. And the benefit would go almost entirely to younger and healthier people—while older people would actually be charged quite a bit more.

    I guess we have to decide if this is a problem. People who use more healthcare will pay more than people who use less.

    It's my understanding that relying on principles like this is racist and hateful. So older, wealthier people who are close(er) to being eligible for Medicare will pay more for private insurance.

  • NotAnotherSkippy||

    Just like peter questioned the 24mil fewer insured estimate? You do know that that was based on a combination of the adverse selection, primarily people choosing to go without insurance (oh the horror!) and an assumption of medicaid expansion under current law, right, pete? So if you don't want to believe the 10% reduction relative to current law, then you can't whine about 24mil losing coverage either...

  • Dizzle||

    First comment ever! Longtime reader, had to piggyback on this sentiment...

    The author carelessly omits the age provision in obamacare isn't compressing rates. It's raising them across the board. That's one of the main reason premiums have skyrocketed (mine went from $135/mo first year of aca to now $290/mo with higher deductable and copay for the most similar coverage i can find to my original plan) on younger people (I'm 30, young in healthcare terms lol). Not just because of shifts in cost and new taxes, but literally so the insurances can charge 3 x $290, not just 3 x $135.

    Will allowing a 5x formula raise costs on old people, sure using my current cost. But if you can lower my (read younger person) cost back nearer my original $135-150/mo... 5 x $150 = $750. 3 x $290 = $870.

    So IF they can steadily lower my cost back down over time, that 5x can still end up better for the elderly. All we need to know is how much this plan could lower costs on the healthy young. Still not sure it will, but it can't get much worse than $300/mo for basic coverage.

  • Red Rocks Baiting n Inciting||

    All we need to know is how much this plan could lower costs on the healthy young. Still not sure it will, but it can't get much worse than $300/mo for basic coverage

    Oh, just you wait.

    Seriously, this was one of the (un)intended consequences of the ACA--that healthy young people and the middle class would get shafted to pay for the poor and those with pre-existing conditions. The idea was that if you force healthy young people to buy insurance, who often went without unless it was offered through work, their premiums would magically raise the available pool of money and healthcare costs would be lowered since the risk pool was supposedly diluted with a bunch of people who never went to a doctor unless they were injured, severely ill, or had a major health malady.

    Of course, what happened was that insurance companies began abandoning the marketplaces and the co-ops swiftly went under after a couple of years, even with the business exception being extended out from its initial target date ending. Because liberals think that healthcare is a right instead of a service that costs money, and stupidly believed that the problem was a lack of access to cheap health insurance for the favored groups instead of misdirected regulatory efforts and a lack of transparency on pricing.

  • XM||

    Kill the individual mandate, and revive cheaper plans so people have options can escape the higher premiums. Or (gasp) they might choose to go uninsured.

    Why is this so hard.

  • Damned||

    Because no one wants to say what should be done about the uninsured who end up using ER services anyway, suffer and die, or file bankruptcy and not pay.

    Call them "illegal patients" maybe.

    Either make it clear that if you do not have insurance, no hospital or doctor is required to tend to you, and that you may use lethal force to stop trespassing of medical facilities.

    Seriously, if the idea is so morally right, preach it louder. Explain it, and then stand behind it

  • Red Rocks Baiting n Inciting||

    Either make it clear that if you do not have insurance, no hospital or doctor is required to tend to you

    Yeah, because God forbid paying cash for a service should even be considered.

    You've just presented a major problem with the American healthcare system there in one sentence, but you're too dim to understand it.

  • Damned||

    Because when you are lying in a ditch after an accident or grasping your chest, you are going to be offering cash to the ambulance driver. And the chaser behind it.

    Yup, dim watch is on.

  • Red Rocks Baiting n Inciting||

    Because when you are lying in a ditch after an accident or grasping your chest, you are going to be offering cash to the ambulance driver. And the chaser behind it.

    Because when you go for an annual checkup or need stitches, you should only pay with an insurance plan.

    Like I said, you managed to explicate what the problem is, but you're too dim to understand it. Which is probably why you lefties are constantly demanding that someone else subsidize your lifestyle.

  • Damned||

    Notice how vigorously reason.com attacks the falsehoods of John McCain (as it should).

    Then notice how much they dilute their criticism of Drumpf's lies. Usually by trying to parse words very narrowly, or including something Hillary did or might have done, or, as was the case in the "no evidence of wiretapping" today, nothing.

  • Dizzle||

    If you're brave enough to watch it, Mark Levin actually broke that story down incredibly well on one of fox's Sunday morning shows last week. Tons of sources cited from numerous media outlets. Its really eye opening. Here's the Breitbart link.

    http://www.breitbart.com/video.....ng-claims/

    One of the best parts is when he points out the Jan 19th new York times article that literally cites intelligence sources saying "wire tapped" communications from trumps team were provided to the white house (Obama) and they showed no conclusive evidence of collusion. Then literally the same writer tries to claim in an article this month that there was no evidence of wire tapping trumps team. It's like he forgot what he wrote barely a month prior lol.

  • Hank Phillips||

    I would expect a Reason writer to be able to distinguish between a claim and prophesying based on superstition and wishful thinking. The whole point to anything God's Own Prohibitionists do is to bully and coerce women into reproducing against their will and ban anything liable to compete with cigarettes, beer and caffeine. There was a time when even Canadian politicians stooped to such nonsense--but not any more.

    Why not do a piece on the PHIT bill to make gym workouts tax-deductible?

  • Damned||

    Look, Paul Ryan and the Republicans tried to ram this through without a CBO score. You are going to care that he projects lowered insurance costs?

  • Liberty Lover||

    Will politicians ever quit trying to address insane health care rising costs by actually enforcing current laws instead of trying to manipulate insurance? If cost keep going up, insurance does no good. We have consumer laws, pricing laws and anti-trust laws. The Federal government refuses to prosecute under these laws because of medical monopolies. If not fixed predictions are Medicare alone will exceed the current federal budget in 4-8 years. We are in for a total economic collapse if health care continues to go up by the current average of 10% a year. Why won't the politicians address this promptly? The medical monopoly and their lobbyist put a lot of money in their pockets in the form of campaign contributions. Corruption runs rampant in Washington D.C.

  • Red Rocks Baiting n Inciting||

    Will politicians ever quit trying to address insane health care rising costs by actually enforcing current laws instead of trying to manipulate insurance?

    Doubtful. Look at Damned's comments above. Americans take it for granted now that insurance = healthcare, despite the fact that healthcare costs were dramatically cheaper back before Medicare, Medicaid, the HMO Act, and Obamacare. Every effort the government's made to interfere in that market has resulted in costs going up. And commenters like Damned find it baffling that you should be able to walk into a medical facility or go on the web and find out what those providers are charging for their services, while using insurance for what it's actually intended--emergencies only.

    So yeah, we're fucked because of Free Shit Army sad sacks like Damned and corrupt pols like Ryan who won't demand that existing anti-monopoly laws be enforced to open up competition.

  • mortiscrum||

    Is it really necessary to be such a grouch?? Damned posted their opinion(s) in a completely non-inflammatory way. Would you respond with such insults in person? Relax. It's just a comment section, and it can be a lot of fun hashing things out if we'd all just chill out a bit.

  • ThomasD||

    "Is it really necessary to be such a grouch??"

    I find his responses to be rather mild given either the ignorance, or the mendacity displayed by Damned's argument. RRBnI is merely noting the three card monte aspect occulted within the typical leftist rhetoric over 'healthcare.'

    But, of course, I'm the sort who does not think it rude to point out when someone else is being rude.

  • Red Rocks Baiting n Inciting||

    Is it really necessary to be such a grouch??

    When shitheads like Damned quit trying to stick their hands in my pocket via insincere arguments ("IF PEOPLE DON'T PAY FOR THEIR HEALTHCARE WITH AN INSURANCE PLAN THEY'RE GOING TO DIE!!"), I'll stop griefing them. They don't argue in good faith and are constantly shifting the goal posts, so there's really no reason to give their positions any legitimate credence.

  • mortiscrum||

    C'mon, Damned is not personally draining your bank account. It's fine to get fired up, but personal insults are completely unhelpful.

    Frankly, I think you're ascribing a position to Damned that the comments on this thread simply don't support. Now it's quite possible you've traded ideas with Damned before and have more info to draw from, but based on this thread alone I don't see what you're seeing.

    Anyways, I'd like to quote something Damned said -


    I too would like to know the answer to this question. There's no perfect healthcare system; there's always going to be losers and winners. It seems plainly obvious to me that the major drawback of a free market system is it WILL create a substantial underclass of sick and/or poor people that won't be able to attain the care they need (or any, even). Maybe that drawback exists but is worth it considering the benefits, maybe it doesn't exist, maybe there's a way to mitigate it, etc. No matter the case, I've yet to hear a decent argument on this point from a free market believer.

  • mortiscrum||

    Whoops, messed up the quote. Meant to quote this, from Damned -

    Because no one wants to say what should be done about the uninsured who end up using ER services anyway, suffer and die, or file bankruptcy and not pay.

  • Red Rocks Baiting n Inciting||

    And it's telling that the left never touches price transparency with a ten-foot pole. In fact, they never bother to consider it in their arguments--they take it as a given that ANY healthcare service, emergency or no, won't have a price attached to it before someone agrees to it. And the simple reason they don't touch it is because they know that opening up cost transparencies will work to lower healthcare prices, as people shop around for good doctors who won't empty their bank account for an annual physical or a few stiches.

  • Red Rocks Baiting n Inciting||

    Because no one wants to say what should be done about the uninsured who end up using ER services anyway, suffer and die, or file bankruptcy and not pay.

    I already addressed this above, as did Liberty Lover--enforce current anti-monopoly laws, quit enabling price discrimination practices, and open up transparency of services. Leftists merely assume that a perfect healthcare system is one that is fully controlled by the government, and use appeals to emotion such as the quote above to imply that if someone doesn't buy a comprehensive health insurance plan, they're going to drop dead from a lack of care. There's no nuance in their argument because they expect someone else to pay for their needs. Granted, the left has done a fantastic job of conflating "insurance" with "healthcare" in the minds of Americans, but that's not how insurance as a concept has historically worked. Insurance is about RISK, not about FAIRNESS--hence, why 16-year-old boys pay through the ass for car insurance while middle-aged women don't. Because, quite frankly, expecting healthy people to foot the cost of care for a fatass 350-pound diabetic who shoved fried meats, soda, and junk food into their gullet for years despite knowing the long-term consequences is immoral.

  • mortiscrum||

    Price transparency would be awesome. As would relaxing the regulations that dictate what an insurance plan must cover, relaxing regulations around who's allowed to do what procedure, speeding up drug approval, and shifting the entire system towards "pay for results." I'm also a fan of patient-driven healthcare; i.e., giving people money and letting them manage their health finances.

    All of these things don't add up to free market healthcare though, nor are they incompatible with government "interference" in healthcare.

    Even if a free market system was able to reduce healthcare prices by 60% across the board, healthcare is still so expensive that a LOT of people would be unable to absorb many/most healthcare costs.

  • Red Rocks Baiting n Inciting||

    All of these things don't add up to free market healthcare though, nor are they incompatible with government "interference" in healthcare

    What we have now is "government interference", though--interference in the market's ability to set prices according to what it will bear, and enablement of the current opaque pricing system that is driving up costs through lack of anti-monopoly enforcement.

    Even if a free market system was able to reduce healthcare prices by 60% across the board, healthcare is still so expensive that a LOT of people would be unable to absorb many/most healthcare costs.

    There's no reason that patients can't set up payment systems for things like more complex surgeries (this already gets done even with insurance plans when the bill is in the hundreds or thousands after insurance is done covering their part), and given the high cost of so many Obamacare plan deductibles, a lot of those costs would have been borne by the patients anyway--and with the price drops from competition, will be easier to absorb and manage. Routine procedures and minor outpatient procedures would be covered more easily by HSAs or even simple cash payments, and it would be harder for ER doctors to charge exorbitant rates for simple things like stitches or a cast.

  • Red Rocks Baiting n Inciting||

    And yes, in some cases people are going to have to make a decision--do they drive up their own medical costs to get another few weeks to a couple of years of life, eating up their estate and pinning any remaining obligations on their children to cover, or do they accept their mortality and prepare for the final curtain? Because in a government system, that choice is going to end up being made for them as a cost-saving measure regardless, via wait times and prioritization.

  • mortiscrum||

    It looks like we agree, largely. I'll still defend the ACA because I think it does do a lot of things right - especially considering the system it was trying to fix. American healthcare was a boondoggled mess long before the ACA came along, and the ACA at least shored up some of the holes we had prior. Not without significant cost of course, but costs that I think are worth it, on balance.

    My King-for-a-day ideas? I'd like ALL entitlement spending (SS, Medicare, Medicaid, SNAP, etc.) rolled together and used to make a universal, bare-bones healthcare-for-all system that provides basic medical needs. It'd be kind of interesting to set a dollar amount. Any procedure that costs less than, I don't know, $250 would be automatically covered by the government. In my head at least this creates a huge incentive for providers to tactically lower costs on things in order take advantage of the autopayment mechanism.

    The rest of the money? UBI. The best way to help someone out of poverty is to give them cold, hard cash. Let them apply it in whatever way will help them the most. Buy more comprehensive insurance, rent, food, etc.

  • Red Rocks Baiting n Inciting||

    C'mon, Damned is not personally draining your bank account.

    His arguments stem from the position that everyone should own health insurance, ironically using emergency situations to advocate for a comprehensive system.

    It seems plainly obvious to me that the major drawback of a free market system is it WILL create a substantial underclass of sick and/or poor people that won't be able to attain the care they need (or any, even).

    An assertion that's merely question-begging. The healthcare system is one of the most interfered-with markets in this country, ranging from various welfare schemes to coercive mandates, which are undergirded by the enablement of market monopolies by the FDA and DoJ which allow a lack of price transparency. The result has been healthcare costs which have risen at 2-4 times the rate of inflation for decades. In this day and age, there's no logical reason that healthcare providers can't employ an analyst to determine how much they can charge for a service and still stay in business, and then post those prices on their website.

  • ThomasD||

    "C'mon, Damned is not personally draining your bank account..."

    And another mendouchous twat unmasks himself.

  • mortiscrum||

    First, looking up what "mendouchous" means.....google spell corrected to "mendacious".......Hm, that's a good word. Thanks.

    But no, I'm not being deceitful, or disingenuous (the other long word people love to accuse me of). I'm trying to lighten the mood, keep things fun, and engage in some debate.

  • ConnarchyInTheUSA||

    I googled vigorously and could find no definition (Not even on Urban Dictionary, go figure) for mendouchous.
    Help a layman out here. WTF does "mendouchous" mean?

  • mortiscrum||

    See, I originally thought ThomasD had just misspelled/mistyped "mendacious," but after I commented I decided it was an intentional mixing of mendacious and douche.

    An obnoxious liar, perhaps?

  • mooo||

    Dubious? He's lying, based on the very CBO source he cites. ...just another US politician on the make, selling out US citizens for his own personal profit.

  • ConnarchyInTheUSA||

    You know, in a way I hope Cronycare gets passed. That way, when it further screws up an already sorry situation, the Republicans can be left scratching their heads for the next 50 years, wondering why the Democrats can't be voted out of Congress anymore.
    I'd ten-to-one rather have an honest enemy than a false-friend, like that half-truth telling POS Paul Ryan.

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