Over at the Atlantic, Chris Good points to a troubling new Lewin study that the GOP will undoubtedly incorporate into its talking points. The new report for the Peter G. Peterson Foundation, concludes that the House legislation as amended by the Energy and Commerce Committee “would incur a $1.01 trillion net cost to the federal government from 2020-2029 “due to rapid growth in health care costs that will outpace the growth in incomes and revenues over the longer-term.’” After 10 years, the bill will add only Here are some of the ugliest numbers:
- The net federal cost of the Act over the following ten years (2020 through 2029) would be $1.01 trillion (excluding debt service costs) due to rapid growth in health care costs that will outpace the growth in incomes and revenues over the longer-term.
- Families in which all members currently have insurance would save an average of about $176 under the Act, while families with one or more uninsured members would, on average, see an increase in family health spending of $1,410 per family.
- Overall, employer health spending would increase by an average of $305 per worker. Employers that currently offer insurance would see an increase in health spending of $123 per worker, while employers that do not now offer coverage would see an increase in health spending by an average of about $813 per worker.
- The study assumes that employers would eventually pass their higher benefit or tax costs through to workers in the form of lower wage growth. As a result, average after-tax wages would decline by $180 per family. Those effects are captured in the impact on families and individuals. On average, families would see health care spending increase by about $120 in 2011 as more people gain coverage and some people obtain better coverage.
At first glance, the study — while certainly troubling twenty years out — undermines the GOP’s doomsday predictions. The public plan does not crowd out private coverage. The employer mandate doesn’t result in large job losses. The plan is almost deficit neutral after 10 years, 30 million Americans obtain health insurance, states and small businesses save money, Americans with health insurance save money and small businesses “would save up to $813 per worker.”
But scoring something 20 years out is always tricky (and the report’s ability to predict the increase in cost per family to a dollar amount is almost laughable.) As Congressional Budget Office head Douglas Elmendorf has repeatedly pointed out, “it is very hard to look out over a very long term and say very accurate things about growth rates.” “We have very little evidence about interlocking changes in the complex health-care system, and I don’t think that our numbers should be the ultimate determinant of the policies that you and your colleagues will vote for and against,” Elmdenorf said.
Indeed, the CBO has certainly made its share of mistakes in estimating the budgetary effects of policy 10 years out — and it doesn’t help that Lewin, like the CBO, is going for 20, while dismissing system savings.
Like the CBO, Lewin does not calculate the savings from implementing electronic medical records, health information technology and reforming the way Medicare and Medicaid reimburse providers (so-called modernization policies). As Melinda Beeuwkes Buntin and David Cutler pointed out in a recent analysis, these savings can total to some $2 trillion. In fact, even the industry is on record as saying we can reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years, lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth.)
In other words, a $1.01 trillion cost is an inference that ignores system-wide savings — savings that policy makers can guarantee by including a so-called fail-safe option. In other words, a commission would monitor health care spending and implement a series of measures to address the problematic areas.