Nauseating Health Care Idiocy from Forbes
A non-blogging friend points me to this new article at Forbes by Chris Conover purporting to show that the “typical family of 4” will see its health care spending rise by $7450. He quotes the Center for Medicare and Medicaid Services (CMS), saying “in its first ten years, Obamacare will boost health spending by ‘roughly $621 billion’ [that’s the CMS quote] above the amounts Americans would have spent without this misguided law.” How stupid is this? Let us count the ways.
First of all, this is not $7450 per year, but over the entire 10-year (or more likely 9-year; he usually refers to 2014-22) period. So he’s hyping shock value that isn’t there. As he explains, he divides the $621 billion by total population over the period to give a per capita cost, which he then multiplies by 4 to get the cost to his “typical family of 4.” So what we’re actually looking at, before we start tearing up his calculation, is ($7450/9)/4 = $207 per capita higher spending per year on average. Recall that in 2011 the United States spent $8174.90 per person on health care (see link on how to navigate to the ultimate source for this data, stats.oecd.org).
Second, Conover doesn’t understand present value. He writes, “Of course, all these figures are in nominal dollars. In terms of today’s purchasing power, this annual amount will rise steadily.” Of course, it is just the opposite. A dollar in 2022 is worth less than a dollar today. In 2013 dollars, the amount is less than $207 per person per year (how much less depends on what you consider an appropriate discount rate). How does an editor not catch this? I have a screen shot to memorialize the error after it eventually gets fixed.
Third, Think Progress’s Igor Volsky is completely right when he quotes Paul van der Water of the Center on Budget and Policy Priorities that none of this will apply to the “typical American family” because that family gets its insurance at work. More money will obviously be spent over time, but it won’t be spent at the center of the health insurance distribution, if you want to look at it that way. But Conover can’t see this point. Instead, he points the finger at President Obama for promising that the ACA would reduce premiums for the typical family by $2500 per year. Not only do two wrongs not make a right, but…
Point four is that what he says is impossible just isn’t: “It’s simply not possible for national health spending to rise by $621 billion and for the “typical” family to expect a $2500 (per year!!!!) premium reduction.” I don’t know if it will happen, but it certainly isn’t impossible. Conover is overlooking the fact that the increase in health spending is being funded in ways that don’t come out of individual health care spending. High-income taxpayers ($200,000 single, $250,000 filing jointly) are paying 0.9% points more in Medicare tax and an extra 3.8% on investment income. According to Robert Pear of the New York Times, “The new taxes on wages and investment income are expected to raise $318 billion over 10 years, or about half of all the new revenue collected under the health care law.” The medical device tax will raise $29 billion over 10 years, over $100 billion will come from insurance companies, $34 billion from drug companies, and $150 billion from the “Cadillac” tax, according to the Obama administration. (We can debate the wisdom of this tax, but it doesn’t fall on the “typical” family.) We’re already at $631 billion over 10 years. If we increased these taxes more, yes, we could use the money to fund premium reductions, most plausibly by increasing the income levels eligible for subsidies.
Then, there’s the little matter of the newly insured. By 2022, according to the CMS report Conover cites, 30 million more people will have insurance than would be the case without Obamacare. While many of those people will be receiving subsidies, a lot of them will be paying something for their insurance, adding even further to the sources of income that don’t come out of what the “typical family” will pay.
Finally, the new 30 million people will be covered very efficiently. $621 billion divided by 9 years is $69 billion per year, divided by 30 million people is $2300 per person per year. While that figure is too low because we won’t be insuring all 30 million immediately, remember that 2011 U.S. health spending per capita was $8174.90. Any way you look at it, the newly insured will be costing far less per person than those currently in the insurance system.
There you have it. Forbes‘ most-read story of the day (with over 26,000 Facebook shares and 3400 tweets as I write this) is simply false. Between all the new taxes and the premiums from the newly insured, you can cover the total increase in health care spending. The typical, already insured family isn’t going to see increases due to the rise in overall health care spending. You add 30 million new insured at a far lower cost than what we currently spend per person. And the editors didn’t catch a blatant error on present value.
Point 3 seems to be missing half a sentence at the end.
And the editors didn’t catch a blatant error on present value.
Uh . . . It’s Forbes. Do you think they have the slightest interest in presenting factual information on this topic?
Neither do I.
Cheers!
JzB
On point 3, I actually intended to leave the sentence unfinished, but have added ellipsis to make it clearer that the thought flows into the next paragraph.
It may be Forbes, but Conover’s day job is as a researcher at Duke University. I am still scratching my head over how he made what appears to be an obvious error.
A new government program which promises to be cost effective?
How many times have you heard that lie???
Furthermore, it will be another class of people voting for the big government party, someone I am sure Mr Thomas voted for in 2012…
In the past three years, thanks to CommieCare, our health premiums have increased by over 30%…
And if it is so great, why all the exemptions? Mr Thomas, would you support op-out or exemptions for any filer?
Hans…
Aside from the Commiecare comment, pointing to medical costs rising as a part of Obamacare is simply a joke Hans….review the last ten years for instance, on rising medical costs….and tell me how Obama accomplished that in his way back machine.
Ken:
If we wait one week, the cat will be out of the bag for healthcare insurance pricing. Will Conob=ver eat crow as a result? Probably not; however, he will shut up.
Mr Crawford, I am sorry, however, I do not understand your question…
Would you be so kind and rephrase it for me? I apologize for my doltishness….
Hans,
You’re talking nonsense and Dan is being too nice to point that out. The past three years, or the decades before that, have seen rising healthcare costs. ACA doesn’t go into effect until Jan 2014. So how has Obama and the ACA legislation contributed to the increased costs that had already taken place.
The ACA legislation is intended to get the cost of health services and the cost of health insurance under some control while at the same time making health insurance more accessible and honest to its subscribers.
I do wish that the Obama entourage would do a better job of presenting this legislation to the public. That should include someone, not Obama, getting in front of the media and pointing out that they are abetting deceit and deception by publishing crap that is often outright lies. Even the coverage of Ted Cruz’s absurd grandstand play didn’t point out that virtually all of what he had to say had little or nothing to do with the reality of things. He is allowed to lie when addressing the Senate and not be called out when he does so?
Also, the framing often seems so inept. Obama keeps stating that health care should not be a privilege, but should be seen as a right. That can be argued until the cows come home. why not simply point out that health care is an essential necessity. It is neither a privilege of the rich nor a right to us all. The good health of the populace is a essential to a healthy and growing economy and a strong nation. Rights and privileges do not enter into the argument. Being able to pay for what is essential to life is a necessity.
Jack, talk about deceit and deception, like how the bill was past in the first place…
A MAJOR piece of legislation and not a single vote from the opposition..
2,ooo pages of lawyering and as NP said we have to pass this to read it…That is great management style for a bill which will effect 1/6 of the economy…
Jack, the only necessity is freedom and the rest will take of it’s self…
The increasing cost to insurance carriers for future reckless benefits, that is what it is all about…
Being self-employed, my wife and I have been paying ever more for the past three years…
We are in our early 60’s, our health insurance monthly cost is $1,ooo and if I include the deductibles another $6oo per month…
That is $19,ooo bucks for health coverage…I can not offer it and paying for it out of my retirement account…Lovely ha, Jack…
I wonder how much government staff paid for their insurance?
Everything is going to be beautiful now that we have villagecare, Jack?
We are simply heading down the road to serfdom…Another fail Euro state wherein the left has learn nothing…
As I ax before, why are you forcing me against my free will or does it not matter?
Mr Crawford, OC had little to do in the last seven out of 10 years with increasing health care costs…
This is indeed a very complex issue, however, I can a sure you that governmental spending in that sector surely has inflamed prices…