I took a day off yesterday to be with my daughter on her birthday, and all hell broke loose in the healthcare reform debate. The proximate cause: a report from PriceWaterhouseCoopers — commissioned by the gang over at America’s Health Insurance Plans — projecting that health insurance premiums would skyrocket as a result of several key provisions in the healthcare reform bill out of the Senate Finance Committee.
The report is flawed and biased, as several policy experts point out (see Ezra Klein here and Jonathan Cohn here). For example, the report assumes that taxes on high-cost health plans would simply be paid, rather than resulting in people shopping around for lower-cost plans. It also ignores the impact of government subsidies on net insurance costs to households. All I can say is, dude, what did you expect from an industry-sponsored study?
In fairness, however, the report does raise some serious concerns — namely, reform that leaves millions uninsured in part because of a weak coverage mandate is a formula for adverse selection. Furthermore, it’s likely there will be some cost shifting and pass-throughs to the employer-sponsored insurance market. (Probably nowhere near the magnitude the study assumes, but nonetheless).
Yes, lots of people will get better — and cheaper (sorry, AHIP) — coverage through insurance exchanges with standardized (read: commoditized) benefit structures, as Jonathan Gruber of MIT notes. But the legislation simply has no meaningful cost-control mechanisms to “bend the curve” — a key failing that will haunt this round of reform in years to come.
The thing about the report that’s almost comical is that it has succeeded in putting supporters of healthcare reform in the awkward position of defending the flawed Senate Finance Committee bill and pretending that the legislation won’t have lots of unintended consequences. It also raises the question of whether the insurance industry — which has supported some important aspects of reform — is now out to kill the effort.
My guess is no. The industry isn’t out to kill reform; why kill something that gives you most of what you want, i.e., no public option and no serious consideration of single-payer healthcare. I do think the industry is still lobbying for a stronger insurance coverage mandate to address the likelihood that the young and healthy will simply pay a small fine rather than buy health insurance. The industry is also out to gut some parts of the legislation it doesn’t like — mostly, the $6+ billion annual “Health Insurance Provider Fee,” which represents about 20% of industry pretax profits (see prior post).
All told, I view this report — and the associated fireworks — in the same light as the fanfare surrounding the healthcare industry’s promise earlier this year to cut $2 trillion in healthcare costs over 10 years (see prior post). To wit: the report and its hyperbolic assumptions will soon be forgotten. What we will have to live with for years is the Baucus legislation and all its very real shortcomings. Perhaps AHIP is already firing the first salvo in the next great healthcare reform debate — the one where the nation moves another step closer to single-payer healthcare or a highly regulated public-private insurance market. See you then.