Silly season in health care

Election day approaches, so politicians are playing games with health care reform.

First, the Democrats. Perhaps someone should remind the president his political opponents are called Republicans, not insurers.

President Barack Obama plans to give a health-care speech Wednesday to highlight the new provisions, with a “heavy emphasis on people who are already benefiting from the law,” an administration official said.

He will also meet at the White House with state insurance commissioners to discuss their role in making sure insurers don’t improperly blame the new law for big premium increases, and to talk about enforcing patient protections, among other topics, the official said.

(Credit: Wall Street Journal.)

The president is bent out of shape because some insurers have pointed out that their premiums will rise next year, in part, because federal mandates will drive underlying costs up.

Here are Obamacare changes going into effect Thursday:

Provision: Young adults can stay on parents’ plan until 26 years old.

Provision: New plans must provide dozens of preventive services without charging a copayment. Applies only to plans sold after Sept. 23.

Provision: No lifetime limits on benefit payouts.

Provision: Begins to phase out annual limits on benefit payouts, starting by making the limit no less than $750,000.

Provision: Insurers can’t deny children coverage because they have a pre-existing condition.

To be clear, I think these changes are a good idea. However, they cost money, and that cost is going to be reflected in premiums.

Add to that the inflation expectation of 6% to 8% a year – a reality since the ’80s. Then, on individual policies, add in adverse selection – fewer people will be able to afford those more expensive policies and those that drop out will be the healthier (read: lower cost) risks. You’re left with 15% increases, which is about what we’re seeing.

As the president bashes away, keep in mind that his health care plan depends on a powerful insurance industry to drive down ever rising costs among doctors, hospitals and the entire medical industry.

But the silliness goes both ways. A couple weeks ago, Obamacare opponents were agog that this study in Health Affairs that indicated that by 2019, Obamacare would increase U.S. health care spending by 0.3% of GDP. The New York Post was more heated than most, but only a bit, in the deliciously headlined, Feverish $pike in ‘O’ care:

WASHINGTON — Health-care costs are forecast to rise after enactment of President Obama’s new health law — and the average American will have to shell out an additional $265 each year for care, a new government report concludes.

Factoring in the law, Americans will spend an average of $13,652 per person a year on health care in 2019, according to the US Office of the Actuary. Without the law, the corresponding number would be $13,387.

By 2019, health-care spending will be a fifth of the nation’s gross domestic product, according to the estimate by the Center for Medicare and Medicaid Services.

The estimate is three-tenths of a percentage point higher than what was projected before passage of landmark health legislation this year.
Pre-Obamacare, health care spending was scheduled to be 19.3% of GDP. Now it’s projected to be 19.6%.
A couple points:
  • Any actuary will tell you the uncertainty of projecting something that big that far out is far more than 0.3 percentage points.
  • For that $265 per person, more than 30 million people come off the rolls of the uninsured. Seems like a bargain to me.
And as a chart from the Health Affairs article shows, there’s a spike in costs in 2014 (the red line in the chart below) when the plan fully kicks in. After that, Obamacare will ameliorate health care inflation.

The cost of Obamacare

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