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Friday, August 28, 2009

APPENDIX II. CRITIQUE OF CBO ANALYSIS OF HEALTH REFORM BILL OF 2010


The following was an editorial written in January of 2011, when Republicans symbolically challenged the recently enacted Democratic medical insurance "reform" bill commonly referred to by opponents as Obamacare despite the fact that President Obama kept a public distance between the White House and deliberations in Congress that Rahm Emmanuel had carefully orchestrated with .Obama and Democratic Senate leaders.



The Democratic health care reform bill passed last year is being hailed as an important step in controlling costs now totaling 17% of the GDP. Republicans have made repeal of the law a major priority. This is political posturing, but the idea of repealing the Act is sound. The Congressional Budget Office (CBO) report claiming billions in savings is deeply flawed. It is only a “best guess” projection based on unrealistic assumptions. Even if we accept this flawed analysis, the tax money it claims will be saved is only 0.5% of the GDP. This would not noticeably “bend the cost curve” of health care.

Princeton Health Economist Uwe Reinhart has long argued that a single payer system is the only way to provide universal health care in an affordable manner. He wrote that "The rigid, artificial rules under which the Congressional Budget Office must score proposed legislation unfortunately cannot produce the best unbiased forecasts of the likely fiscal impact of any legislation.” He added that it is less irresponsible than the Wyden-supported Medicare Modernization Act, small praise indeed. The costs of that Act are crippling Medicare because of its ban on negotiating prescription drugs provided under Part D. No wonder DeFazio rejected all efforts by single payer supporters to sign on to HR 676 with the excuse “Medicare is in serious trouble,” so we can’t afford to give it to everyone.

Over one third of projected savings under the insurance “reform” bill come from new fees and taxes on medical insurance providers and manufacturers of pharmaceuticals and medical devices. Conspicuously absent are any serious cost controls on the corporations in these industries that spent billions to influence the reform debate. Common sense tells us that these costs will simply be passed on to the patient in higher charges for these goods and services. 

Most notable among the missing cost controls is an end to the ban on negotiating Medicare drug prices. Wyden may have cast the deciding vote for this boondoggle of the borrow-and-spend Republican Party, but President Obama cemented the Democratic Party’s image as tax-and-spend liberals when he took this issue off the table. This poison pill will become more deadly to the health of Medicare as the donut hole is eliminated. For those who remember the CBO report on the Medicare Modernization Act, it was famously off the mark, concealing the true costs of the revisions that gave us Part D and that extensively privatized Medicare, until the issue was largely off the public’s radar and not a factor in the 2004 elections. The Democrats were not so lucky in 2008, where anger over the health care bill on both sides played a major role in defeating good Democrats.

CBO reports consider only estimate the costs of a proposed bill to the government. It is nice to know that those earning in excess of $200,000 per year ($250,000 per married couple) will bear more of the burden of paying for this new jackpot for the medical insurance industry but before we celebrate this victory for the People, let’s look at the hidden costs. 

The taxpayer will pay for the millions who cannot afford insurance without subsidies. Parents are now mandated to pay for insurance for “children” up to age 26. “Cadillac” plans will be taxed. HSAs and flexible health savings accounts will have new restrictions, including eliminating drug costs under the plans and lowering limits. I could go on, but the point is that the user ultimately pays for health care provided by private insurers. In failing to provide real savings, conservatives and liberals alike should be angry at this blatant sellout to the medical-industrial complex in the name of “reform.”

The whole plan is based on a mandate to assure that healthy individuals will contribute to the pool, lowering costs for everyone.  However, the cost of policies is so high that those currently uninsured have little incentive avoid the small fine for not buying in. Similarly, many large employers will forgo the new taxes on their business in exchange for paying a fine that maxes out at $2,000. Together, these two groups will undermine this half-hearted attempt to establish a risk pool where everyone shares the burden of paying for uncontrolled health care costs.

A careful look at the assumptions behind the rosy CBO report shows that the real costs are hidden in cost shifting, increased taxes and unrealistic projections of revenue. It assumes lack of inflation due to cost controls that are nearly absent in the bill. The only real savings would be in having a universal pool of patients, which is unlikely. The dramatic increases in insurance costs seen since passage of this bill were predictable for anyone who looked beyond the promises and was willing to face the grim reality that we have been had again.



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