Author Archives: SEH

Getting the facts straight on health care reform

(An edited version is posted on The Enterprise Blog.)

In a New England Journal of Medicine article, Getting the Facts Straight on Health Care Reform, MIT’s Jonathan Gruber writes:

One common refrain of opponents of reform is that it represents a government takeover of health care. But reformers made the key decision at the start of this process to eschew a government-driven redesign of our health care system in favor of building on the private insurance system that works for most Americans. The primary role of the government in this reform is as a financier of the tax credits that individuals will use to purchase health insurance from private companies through state-organized exchanges.

The sentence in bold begs the question of how Professor Gruber defines “primary.”  The House and Senate bills would:

  • Mandate that individuals obtain at least minimum coverage specified by the government.
  • Specify allowable “levels of coverage” and the types of services that must be covered.
  • Prohibit health insurance underwriting, require coverage of preexisting conditions, prohibit premiums based on health status, and substantially limit premium variation in relation to age, thus mandating higher premiums for the young and/or healthy.

The bills would substantially cut Medicare Advantage reimbursement, cut Medicare hospital reimbursement, and create an Independent Advisory Board that could order further cuts in Medicare spending unless blocked by specific legislation.

The list could go on and on.  Reasonable people might regard these changes as representing a “government-driven redesign of our health system.”

The CBO didn’t double count Medicare cuts

Regarding today’s controversy, the CBO’s Medicare estimates do not double count projected cuts in Medicare spending.  Today’s CBO’s letter that referred to “double counting” does not imply otherwise.

It is true that any Medicare savings will be used to pay for expanded coverage, but that has been reflected in all of the CBO projections.

If the projected cuts in Medicare spending materialize, the projected Medicare deficit will decline, but most or all of the reduction will be offset by increased spending on Medicaid and premium subsidies for persons with income up to 400 percent of the poverty level.

Think of it this way:  it’s as if you decide to borrow less to buy a cheaper car (cut Medicare spending) and instead take out a slightly smaller loan to finance an addition to your home (coverage expansion).

The CBO’s projections have made this clear all along.

Correcting myths about health insurance and the sick

Health insurers cannot drop people that get sick.  They do have the legal right in most states to rescind coverage if an applicant misrepresented his or her health on the application for coverage, but only if the correct information would have caused the insurer to charge a higher premium or decline the application.  Any problems on this dimension could be readily fixed at the state or federal level.

Virtually all individual and small group health insurance policies are guaranteed renewable at rates that do not reflect the health status of the policyholder. Coverage cannot be cancelled.  The rate cannot be jacked up because someone gets sick.

Some people have medical claims high enough to exceed their policies lifetime limits.  The frequency of cases where this occurs is very small.  Any problems on this dimension could be readily fixed at the state or federal level.

Most people who lose their jobs and employer health coverage are entitled to extend their coverage for many months under federal law.  They have to pay a premium of 102 percent of the employer’s cost.  The stimulus bill substantially reduced the premium for those who lost jobs during the current recession.  If people continue coverage and obtain a new job with coverage, the new coverage generally cannot exclude pre-existing conditions.