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Post-Election Predictions for Obamacare
Improving the FDA's REMS Program
Are Foreign Clinical Drug Trials Safe?
FDA's Bad Ad Program
Obesity and Public Health
The Route to Reconciliation
Conflict of Interest
Analyzing the Healthcare Bills
President Obama's Plan for Reform
The Healthcare Reform Debate
Priorities for the New FDA Commissioner
PhRMA's New Marketing Code
Personal Genetics Testing
Where health care policy experts have their say
Sources of Medical Research Funding
November 18, 2009:
The Congressional Budget Office has released several scores of the Democrats health reform bills offered in the House and Senate, with 10 year “scores” just under the President’s preferred price tag: $900 billion over ten years. Outside observers, however, have voiced skepticism not about the CBO scoring but with the political assumptions made by the bills. For instance, Congress has repeatedly voted to override the “automatic” physician reimbursement cuts under the SGR formula since 2003, although both the Democrats bills assume substantial (more than 20%) cuts in physician fees starting in 2011. Looking at these bills from this perspective, what are the realistic price tags for the Democrats bills? How will these bills affect long term health care inflation, tax, and government spending trends?
This edition of our expert panel includes:
The House bill pays for nearly half its $894 billion price tag with cuts to Medicare. Despite all the rhetoric about eliminating waste and streamlining processes, the savings come largely through two avenues: ending subsidies for Medicare Advantage and reducing the growth of provider reimbursement rates.
Neither of these moves will be popular. The former will take away added benefits currently enjoyed by the 23% of seniors who participate in Medicare Advantage. The latter will reduce the pool of providers offering Medicare services.
As these changes come into effect, outcry from doctors and seniors will ensue. It is highly likely that Congress will undo these changes in future years, just as it annually “fixes” (read: raises) Medicare physician reimbursement rates. Therefore, I would not expect the bill to cut the deficit by $104 billion over 10 years, as promised in the CBO score. A rise in future deficits is more likely.
While the Senate bill will likely engage in the same Medicare cutting gimmicks, it will also include one genuine cost-cutting measure not seen in the House bill: a “Cadillac” excise tax on high-price health insurance plans. This proposal effectively undoes the tax preference for high price plans that currently fosters overconsumption of health care.
Josh Barro is a Manhattan Institute Senior Fellow focusing on state and local fiscal policy. Prior to joining the
Manhattan Institute, he served as a Staff Economist at the Tax Foundation, where he wrote the 2009 State Business Tax Climate
Index and the 2009 “Tax Freedom Day” report.
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The traditional scoring rules of the Congressional Budget Office (CBO), in the best of circumstances, generally provide only a partial picture of the full economic and budgetary consequences of major health policy legislation. This year’s set of Democratic health “reform” bills offers a particularly massive and complex concoction of long-term spending commitments, interwoven cross-subsidies, price distortions, and regulatory unknowns of the future. Scoring the unscorable presents a daunting challenge for any forecaster.
Nevertheless, CBO pretends to go where taxpayers, insurance premium payers, and future Treasury bond holders fear to tread. As long as its budget analysts are going to present imperfect and limited numbers as if they actually tell us something meaningful, CBO at least should examine some broader issues and apply the same (or better) levels of scrutiny to them. A short list would include:
Thomas Miller is a former senior health economist for the Joint Economic Committee. He studies health care policy and
regulation. A lawyer by training and a former journalist, Mr. Miller has worked on issues ranging from Medicare prescription
drug benefits to medical savings accounts
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The Congressional Budget Office scores should include the costs which will be shifted to premium payers of private insurance. New fees and taxes imposed by the legislation will increase the cost of premiums. Forcing acceptance by insurance companies of those with prior conditions, whose premiums will never recover the cost of their medical treatments, will increase the premiums of all other policy holders. Limiting the size of deductibles and co-payments will increase costs which must be shifted to premium payments, while further severing the contribution to costs from those who demand more services which will drive up premiums even more. The legal requirement that everyone must buy insurance that includes coverage of additional treatments and procedures mandated by government decree, whether policy holders want coverage for them or not, will also increase the cost of premiums. The CBO must recognize that a perfect storm of increased government spending combined with forcing higher costs on insurance companies and their policy holder will cause insurance premiums to soar.
Could it be that is the intent of the legislation--to make it impossible for insurance companies to "compete" with a public option?
Richard E. Ralston has been Executive Director of Americans for Free Choice in Medicine since joining the part-time staff of AFCM in 2002. His letters and columns written in support of individual rights and personal choice in health-care policy have since been published in dozens of major newspapers in the United States.
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