CBO Report On Health Bill Garbage, CBO Compromised!

[JimofPennsylvan]

Some people in the Congressional Budget Office deserve to lose their job over the CBO report on the Senate Health Care bill. This report is clearly skewed to minimize and underestimate the impact this bill if enacted will have on raising health insurance premiums. What is really terrible about this manipulation is not only the fact that some leaders in America have engaged in such dishonest behavior on one of the most important non-security related pieces of legislation of our time but also that these leaders would throw away the reputation and credibility of the Congressional Budget Office to further their interests. Prior to this report, the American people could count on the CBO for giving an honest and truthful analysis, the CBO was a precious and awesome national treasure in this regard; now it is a compromised institution one where its impartiality will be in question.
What is really suspect about the CBO report what makes a prudent person doubt the accuracy of the report is how little upward effect on premium prices the report gives to the Senate bill’s “mandates” that will stop insurance company abuses and guarantee essential benefits. In states that have the joint mandates, which the senate bill has, of no denial of health insurance coverage because of a preexisting condition and communal pricing of health insurance premiums, premium prices jumped up dramatically like twenty and even higher percent when these mandates went into effect. The CBO report evaluates how the bill will affect health insurance premiums by adopting a framework that evaluates three factors to determine how the bill will affect the average premium of an American. The first factor is the difference in the amount of insurance coverage resulting from the bill (by coverage it is not only meant the scope of the services covered but also the share of the medical bills the insurance company will cover (the actuarial value of the insurance)). The second factor can be fairly abbreviated by saying it is largely a measure of the difference in administrative costs to provide health insurance due to the bill. The third factor is the difference in the type of population on the insurance rolls due to the bill.
The CBO report concludes that on this third factor, the type of population on the insurance rolls, the Senate bill will cause the average insurance premium costs for individual insurance to decrease seven to ten percent (p.6). The CBO’s rationale is that the bill will put a lot of young healthy people who don’t generate a lot of medical claims on the individual insurance rolls. This rationale is skewed and doesn’t reflect common sense and state experience referenced in the preceding paragraph. The report doesn’t accurately consider that this bill will “also” add a significant number of people with serious health problems on the individual insurance rolls, people with diabetes and heart disease for instance and these people will be very costly because they need to and do avail themselves of a lot of medical services over the course of a year. On this population factor, the CBO makes a faulty assumption; the CBO makes the assumption that the average health of the population coming on the individual insurance rolls as a result of the bill will be the same as the population on this roll if the bill was not enacted into law (p.18). This assumption isn’t good judgment, isn’t accurate it is common knowledge that a lot of people that don’t currently have insurance are in this state because they either can’t get or can’t afford insurance because of a pre-existing condition and with enactment of this bill these people will be coming on the individual insurance rolls so basic logical thinking would conclude that the incoming population would have worse health. Instead of saying this population factor will lower insurance premiums the CBO should be saying this factor will be increasing premium costs by at least like ten percent. Defenders of the CBO report might say your looking at the wrong factor on this consideration, the consideration of all the people with health conditions pouring onto the insurance rolls, you should be looking at the first factor, the difference in the amount of insurance coverage resulting from the bill. Examining this first factor, still doesn’t save the CBO reports credibility. The CBO’s report concludes that on this first factor the bill will increase premium costs for individual insurance by 27% to 30%. But the bill allots 18% to 21% of that premium cost increase due to people that will be getting federal subsidies, which amount to 57% of the individual market, buying higher actuarial plans (plans where the insurance issuer pays a higher share of the medical bills) and thus causing higher premium costs. Therefore, this CBO analysis leaves 9% to 12% of the premium increase for other reasons and common sense would indicate the Senate bill’s mandate requiring a list of essential benefits to be covered would eat up an awfully large portion of this 9 to 12 percent, it is clear then to a reasonable person that the CBO in this report didn’t give proper consideration to the “no ban on pre-existing condition” and “communal pricing” mandates in the Senate bill.

The CBO projections in its report on the reduction of premium costs due to savings in administrative costs for insurance companies, the second factor, resulting from the bill is speculative and therefore not persuasive. The CBO report says that for the second factor insurance premiums will decrease by seven to ten percent in the individual insurance market because of the Senate bill (page 6). It bases its conclusion on the fact that the system will have tens of million of additional insurance beneficiaries because of all the new people that the bill will bring on the insurance rolls which allows the insurance companies to spread their overhead amongst a greater number of beneficiaries and the community pricing mandates that will eliminate underwriting staff for insurance companies, etc.. The CBO analysis is very one sided though. Although it recognizes that as a result of the bill insurance companies will face an assessment fee by the state exchanges to pay for running of the exchanges, it doesn’t fully consider all the administrative work and costs the bill will cause insurance companies. As a result of this bill, insurance companies will have to do all kinds of reporting to the Secretary of HHS and the public on quality of care matters, set-up programs to reduce re-admissions to hospitals, set-up programs to guard patient safety and reduce medical errors and set-up wellness programs. This bill requires insurance companies to report yearly to the Secretary an extensive breakdown on how they spend the money they collect in premiums. The bill requires not only an internal appeals process for denial of claims but also an external appeals process for denial of claims as well as continuation of coverage while the claim is under appeal. This bill will require insurance companies to have to get their insurance plan certified by an exchange which will involve meeting various criteria and every year they will have to justify premium increases. This bill requires insurance companies to get all kinds of accreditations to sell insurance on exchanges (Sec. 1311(c)(1)(D)(i)). This bill requires insurance companies to develop and implement a program under the exchange authority to improve health care quality for their beneficiaries through pricing incentives to health care providers.
Another reason to find this CBO report suspect and lacking credibility is that the report operates on a bad premise, the premise that ”Small Business” insurance plans in America are largely from a coverage standpoint close to what the essential benefit mandate in the Senate bill calls for (page 10) and that a high number of the small business plans will have grandfather status in 2016 and therefore won’t have to follow the essential benefit and other mandates in the Senate bill. On the first point, the American people have heard, seen and read an abundance of stories in the media involving people having “small business” insurance coverage where their insurance wouldn’t cover medical treatment that the essential benefit mandates in the Senate bill would require be covered. This closeness in coverage position by the CBO doesn’t reflect reality. On the second part of the CBO’s premise, that this grandfather status option for insurance plans that the bill creates will essentially vaccinate plans that can claim this status from the costly insurance mandates in the bill and any other negative economic effects from the bill. A good analysis would consider that after the bill passes into law insurance carriers aren’t going to be greatly committed to holding down yearly premium increases on old insurance plans, insurance carriers are going to consider these old plans a burden plus these insurance carriers will know that the small business purchasers of these old insurance plans can’t do anything about high insurance premium increases because the small businesses don’t want to lose the grandfather status of their plan these small businesses are essentially trapped – small businesses that stick with their old plans will see higher premium increases with the passage of this bill compared to if the bill wasn’t passed on this basis. Further, the media will likely do a good job at reporting sad stories about these grandfather plans with their underinsurance coverage and how an American worker was or will be hurt by the deficient coverage in these plans and authorities and/or public advocates will probably find a way to force small business to drop their old insurance plans, not utilize this grandfather protection, and get a plan that provides essential benefits.
The CBO assumes, to the benefit that tends to find the Senate bill won’t increase premium prices, that an extremely high number of young people who now don’t carry insurance will get insurance because of this bill and the generous subsidies the bill provides. Even with the subsidies, young individual Americans without a family are going to still consider the amount of money they have to pay for premiums a lot of money and blow it off even considering the Senate bill’s $750 penalty on adults that don’t carry insurance. Look at the CBO report’s chart, an individual making $26,500 per year, a pretty common salary figure for a young individual American, will have to pay $2000.00 per year in insurance premiums. An honest assessment would conclude a lot of young people will blow that responsibility off, they will consider that amount a lot of money a real burden to have to pay; moreover, young people have hectic lives, they aren’t very disciplined with money and are not as responsible as older people. To be succinct, the CBO is too optimistic on this issue.