Last Night's Debate on Health Care
By David Henderson
I’m so glad that I don’t need to use quotation marks around the word “debate” in the title above. For the days leading up to it, every time I’ve mentioned it, I’ve used quotation marks because the typical format is Q&A where, if the candidates are good at evading or outright lying, they can often get away with it. But last night’s forum was so open-ended that if one candidate wanted to respond because he thought the other guy was getting away with it, he could. Jim Lehrer tried to prevent that early on when it was Romney’s turn by asking Romney what question he would ask Obama. Had Romney played along and asked a question, then, even with background to the question, that would have taken less than his 2 minutes. So Romney didn’t play along and essentially ignored Lehrer’s thumb on the scales. It was also humorous, by the way, to see Lehrer actually coach Obama when the issue was deficit reduction. Lehrer said:
But — but Mr. President, you’re saying in order to — to get the job done, it’s got to be balanced. You’ve got to have …
Now to the health care substance. I’m still working through what I think but meanwhile, the best thing I’ve seen on it is Avik Roy’s piece on Forbes.com, “In the First Presidential Debate, Mitt Romney Told the Truth on Health Care and Obama Tried Not To.” I’ll preface, as Roy himself does, by noting that Roy is a health-policy advisor to Romney’s campaign.
About the “administrative cost under Medicare” debate, Roy writes:
President Obama delivered this whopper regarding Medicare: “Every study has shown that Medicare has lower administrative costs than private insurance does, which is why seniors are generally pretty happy with it. And private insurers have to make a profit. Nothing wrong with that. That’s what they do. And so you’ve got higher administrative costs, plus profit on top of that. And if you are going to save any money through what Governor Romney’s proposing, what has to happen is, is that the money has to come from somewhere.”
False. Indeed, the most persuasive research on Medicare’s administrative costs comes from my Apothecary colleague Robert Book, who notes that (1) half of Medicare’s administrative costs are booked by other federal agencies; and (2) On a per-beneficiary basis, despite this advantage, Medicare spends more on administrative costs than private plans do.
This post is not a comprehensive treatment of all the health care issues that were covered last night: if you want to see such a treatment, go to the Avik Roy piece.
But one other thing I got out of the Roy article that I somehow missed when he wrote it in March is this:
Obama adviser Jonathan Gruber, on the other hand, filed reports with state governments as to why Obamacare will increase non-group premiums by as much as 30 percent.
This is earth-shattering. Gruber, if you recall, is the MIT economics professor whom many Congressmen relied on when he said that ObamaCare would cause premiums to fall. [For what I’ve written before on Gruber, see here and here.] But Roy links to a piece he wrote in March that points out, with detail and explanation, Gruber’s reversal. One excerpt from Roy’s March piece:
In Wisconsin, Gruber reported that people purchasing insurance for themselves on the individual market would see, on average, premium increases of 30 percent by 2016, relative to what would have happened in the absence of Obamacare. In Minnesota, the law would increase premiums by 29 percent over the same period. Colorado was the least worst off, with premiums under the law rising by only 19 percent.
The money paragraph in Gruber’s report to Colorado comes on page 14. It’s there that he admits that his model doesn’t take into account Obamacare’s biggest change to the insurance market: its requirement that insurers take on all comers irrespective of pre-existing conditions, a.k.a., “guaranteed issue.” Here’s what he has to say about that (emphasis added):
It is important to recognize some limitations in our modeling of prices. In particular, given publicly available data we cannot incorporate the effects of the ban on pre-existing conditions exclusions. This ban will cause a rise in premiums as insurers are forced to cover conditions that they had previously excluded. In addition, there are new premium taxes on insurers that will raise premium rates…Overall, we cannot predict the net impacts of these factors on premiums without more analysis.
It is precisely this aspect of the law–its requirement that insurers cover those with pre-existing conditions–that is central to the analysis conducted by PriceWaterhouseCoopers, the analysis that Gruber and other PPACA advocates criticized back in 2009.
Did you get that? The guy they relied for estimates of the effects of one of the most important pieces of legislation in the last 30 years admits that his own model doesn’t incorporate what everyone who thinks about it regards as one of the most important regulations.