Krugman: Consider The Curve Bent

[ProSense]

Consider The Curve Bent

Wow — a lot of misinformation about the new estimates on health care costs. Read Ezra Klein, who concludes:

So, the nickel version: Spending goes up in 2014 because we’re covering 30 million new people and then down after that because we’re controlling costs in the system.

So yes, there’s a bump when 35 million people who would otherwise have been uninsured get coverage; but growth is slower after that, which will mean big savings in the long run. It really doesn’t matter at all whether your estimate says that overall health spending will be slightly higher or slightly lower in 2019 as a result of the law; aside from the fact that covering all those people with at most a minimal rise in costs is itself a policy triumph, it’s spending in the decades that follow that matters for cost.

And let’s be clear: you could not have gotten the cost savings without the move to near-universal coverage, for both political and technical reasons. This thing really is a package — a package that, with all its flaws, both makes our society more decent and improves our long-run budget outlook.

[Hello_Kitty]

1. $120 billion of it comes from the excise tax fantasy

Where supposedly employers will plow the savings incurred by paring down employee health plans into higher wages which will then be taxed. That's where 80% of the projected revenue comes from. Direct revenue from the tax itself is the remaining 20%. Employers already have been cutting back on health care spending for years and passing additional costs to employees. Wages haven't gone up as a result.

[customerserviceguy]

2. Good point

And I wonder how much comes from Medicare cuts that get restored in other legislation. The financing of HCR is smoke and mirrors arithmetic, and I don't trust any estimates done now about what it will or will not cost. Any time you create distortions in a system by changing the rules, you inspire people to find creative ways of getting around those rules.

I'll believe it when we have some actual numbers. Medicare was projected to cost far less in 1965 than it actually did, it wasn't foreseen how some doctors and hospitals would learn how to milk that cash cow. I'm expecting the same thing from HCR.

[Hello_Kitty]

5. When they refused to even give single payer a CBO score that was all I needed to know.

And choosing an excise tax over better and proven cost cutting measures such as reimportation of drugs was pretty fucking odious too.

[blueworld]

8. +10 n/t

[ProSense]

11. This is spending, and the reason

Krugman says it bends the curve is that it reduces spending by $1.2 trillion through 2029.

The things in the bill that are revenue producing is one thing. They are projected to pay for the bill, that was the plan.

[Hello_Kitty]

16. The excise tax was sold based on the supposition that it would "bend the cost curve"

And it's pretty difficult to discuss a government program of any kind without including potential revenues generated by the program that will ostensibly help offset its overall cost.

[ProSense]

19. It's kind of hard to understand

why reducing health care spending would be a source of contention. Any reform implemented would increase spending. The thing is to bring costs and spending under control, and then to reduce them.

"And it's pretty difficult to discuss a government program of any kind without including potential revenues generated by the program that will ostensibly help offset its overall cost."

Offsetting the cost is one thing (that is health care cost $1 trillion, and it will be paid for by this). The other issue is reducing spending (that is lowering the cost to $1 trillion from $2.3 trillion, and paying for it with this).

Now, you can say that the money to pay for it or the savings will not be fully realized, but the fact is there will be spending reductions and savings.

Either way, the U.S. is going to be spending money on health care. Krugman and other aren't saying that there will be savings for his own health.

[Hello_Kitty]

24. I realize now that you're correct that I was conflating revenue and spending.

My bad. I see that when they talk of bending the cost curve they are talking about all spending on health care and not just government. And yes, you are talking about spending on the program and not the final balance sheet. :blush:

That said, if the $120 billion in excise tax increased wage revenue fails to materialize (and I predict that's what will happen), then that's going to force the government to cut the funding on health care for poor people. Remember that the House proposed a small tax on the wealthy to help pay for the plan and the Senate and WH countered with this excise tax, which they promised would produce $150 billion in revenue, with 80% of it coming from taxes paid on wage increases.

[vi5]

3. On thing I've been curious about in this debate.....

Right now other than medicare and medicaid, the government doesn't pay for healthcare. If a doctor bills someone without insurance, either that person pays or they don't. Or they go without care or whatever. But what I've never understood about this debate is how is the high cost of healthcare impacting government?

I hear it said that a public option or single payer would reduce the deficit by "controlling costs". But what costs are they controlling that are currently now covered by the government?

I think I'm missing something about the debate.

[Hello_Kitty]

4. Actually gov't does pick up part of the tab for the uncompensated care of the uninsured

Nonprofits pay part of it too and some of it is also paid for through higher costs to insured people. However, the thing is, most uninsured people do pay their bills. And uninsured people use only half as much health care as insured people do. People love to repeat the myth of selfish irresponsible health care scofflaws running up huge ER bills and skipping out on them and that being the sole cause of high health care costs. I've been saying for years that uninsured health young adults are the "Welfare Queens" of Democrats' imaginations but the truth is that at most, the uninsured add 8% to the average premium. Based on my own exhaustive online research on this topic (looking at a lot of studies) I suspect it's a gross exaggeration. I predict that achieving near universal coverage (which in itself is a very good thing for society) will not produce the cost savings people expect.

[veganlush]

6. Hospitals write off

..the bills incurred by those without insurance. Thom Hartmann talks about this from time to time. They can write it off, and bill it at "premium rates" because it is often done through emergency rooms. It's written off as charitable giving and it reduces the hospitals tax liability. In other words, under the old system, (and until changes take effect) tax payers picked up the tab for the uninsured that go to the emergency room.

My nephew went in under those circumstances. He had an infection that was making his face swell up huge. They admitted him and did a surgical procedure on him, kept him for a couple of days on the tax payer's dime. Under the new system, he would have had insurance mandated and while he may have had some help paying the premiums, he would have had insurance and could have sought help earlier or maybe they could have prevented an infection. treatment would have been cheaper and the cost to tax payers would have been limited to possibly some subsidizing of part of the premium.

[Hello_Kitty]

10. People with insurance use nearly twice as much health care as uninsured people.

Despite all the "OMG HUGH EMERGENCY ROOM BILLS!!1!" anecdotes about the uninsured, that's what the numbers show. On page 5 of this PDF it says that average per capita (2004) health care spending for the insured is $2975 while it's $1629 for the uninsured. http://www.kff.org/uninsured/upload/The-Cost-of-Care-for-the-Uninsured-What-Do-We-Spend-Who-Pays-and-What-Would-Full-Coverage-Add-to-Medical-Spending.pdf

While I have no doubt that your nephew would have sought treatment sooner with insurance (and that's undeniably a good thing) I remain unconvinced that simply mandating the purchase of insurance will put your nephew or the country in a better stead economically. According to the Kaiser Family Foundation HCR calculator if your nephew is 26, has no dependents, and makes $25K a year he has to come up with $143 a month for his share of the subsidized premium. http://healthreform.kff.org/SubsidyCalculator.aspx

That's not chump change for someone at that income level, especially if he's got big student loans to pay off like a lot of young adults today. Considering that the total cost of his insurance with the gov't subsidy factored in is $3391 per year wouldn't it make more sense to have him be on Medicaid? The gov't is paying $1664 per year for the privilege of forcing the young man to cough up $1726 of his own money for private health care coverage that he's probably not going to use much. I suspect a lot of young people in his position are going to make the calculation that it's much cheaper to pay the fine and take their chances, much as they're doing now with the crappy catastrophic policies currently available to them. Whether or not you or I think that's the right or smart thing to do is irrelevant. The policy wonks in DC seem to have no understanding of how life is for people in this economy and their calculations of Federal poverty level and appropriate premium amounts in this HCR reflect that.

[ProSense]

12. Is this supposed to be good?

The uninsured are spending less because they are getting less care, often too late.

The uninsured who are without coverage for the full year receive about half (55%) of the medical care per person compared to those who have health coverage for the entire year, even after taking uncompensated care into account.

Per capita medical spending for persons uninsured for the full year in 2004 is $1,629 compared to $2,975 by persons who are insured for the full year. This spending gap holds for both adults ($1,864 compared to $3,653) and children ($802 compared to $1,640).

<...>

Having health insurance increases medical care use, and so an important question in the ongoing national debate over whether and how to extend insurance to people who are uninsured is—how much more will it cost, over and above what is currently being spent on the cost of their medical care?

<...>

Research showing that having health insurance positively affects the use of health services is clear and widely accepted—and the case has also been made that having health insurance leads to improved health and longer lives by means of better access to medical care.

[Hello_Kitty]

13. What?? Why are you inferring that from what I posted?

I never said it was good that uninsured people use less health care it just is. What I'm saying is that people are hugely exaggerating the potential cost savings, if there are any at all, from achieving universal coverage. Based on those per capita figures it's conceivable that it could end up costing MORE to cover more people. Which is not necessarily a bad thing if you view health care as a social good, which I do and I assume you do as well.

[ProSense]

20. "What I'm saying is that people are hugely exaggerating the potential cost savings"

Who is predicting a savings from covering the uninsured? The reality is that covering 30 million plus additional people will drive spending up.

[Hello_Kitty]

21. That's funny

Because all through the HCR discussion I kept hearing and reading how the uninsured add 8% to the cost of the average premium. And that gov't spending on health care would go down because more people would have access to preventive care and not go to the ER for everything. Now Krugman, Ezra Klein, and others are forced to admit that covering more people will increase government spending (again, not that it's a bad thing if more people are getting health care) in the short term and promising future cost curve bending by, among other things, Excise Tax Magic.

[ProSense]

22. No one ever said expanding coverage will reduce spending

Krugman 2009

The theory of the reform is as illustrated above. Expanding coverage will, other things equal, increase health care spending. But the expansion of coverage is linked to a serious effort to control cost growth that will, one hopes, “bend the curve”, so that costs eventually fall below what they would have been otherwise.

The fact that the unisured get less care for an amount less than the insured is not related to cost. Emergency rooms charge more for services.

The uninsured also tend to contribute on average a lot less out of pocket.

[Hello_Kitty]

23. Incongruent statement

"Expanding coverage will, other things equal, increase health care spending."

And then:

"But the expansion of coverage is linked to a serious effort to control cost growth that will, one hopes, “bend the curve”, so that costs eventually fall below what they would have been otherwise."

What scenario of "costs" is he talking about here? What the overall cost without the addition of millions of covered people or with? Getting back to the claim that the uninsured add 8% to the average premium and drive up health care costs due to their uncompensated ER visits, it would seem to me that Krugman and others should be able to predict with fair certainty that the universal coverage piece of the plan would lower the cost curve. Yet they can't. Krugman "hopes" that other efforts to control cost growth will accomplish that. Expansion of coverage is "linked" to those efforts but is apparently not, in itself, perceived to be a cost control measure.

The fact that the unisured get less care for an amount less than the insured is not related to cost. Emergency rooms charge more for services.

The uninsured also tend to contribute on average a lot less out of pocket.

But the KFF study I linked takes all per capita health care spending into consideration, including out of pockets but also uncompensated care. The uninsured use less health care overall, period. And again, I'm NOT saying that's a good thing.

[ProSense]

25. "The uninsured use less health care overall, period. "

And tens of thousands of people die without coverage and adequate care. The point is to show the increase is spending due to the expansion of coverage relative to spending on uncompensated care.

<...>

The primary source of funding for uncompensated care is government dollars. Projected federal, state, and local spending available to pay for the care of the uninsured in 2004 is $34.6 billion—about 85% of the total uncompensated care bill.

<...>

Over two-thirds of government spending for uncompensated care comes from the federal government, most of which goes toward payments to hospitals in the form of disproportionate share hospital (DSH) payments—payments intended to offset losses hospitals incur when large shares of their patients are unable to pay their hospital bills.

<...>

Research showing that having health insurance positively affects the use of health services is clear and widely accepted—and the case has also been made that having health insurance leads to improved health and longer lives by means of better access to medical care.

• A conservative estimate based on the full range of studies is that a reduction in mortality of 5-15% could be expected if the uninsured were to gain continuous health coverage.1
  
  
• It has been estimated that the number of excess deaths among uninsured adults age 25-64 is in the range of 18,000 a year.2
  
  
• The annual economic value of foregone health among the 40 million uninsured in 2000 has been estimated to be between $65 and $130 billion in that year.3 If the middle of that range ($97.5 billion) is inflated to 2004 dollars, the annual economic value of the foregone
  health of those 40 million uninsured increases to $103 billion—a sum considerably larger than the $48 billion in increased costs of expanding coverage to all of them.

The additional $48 billion/year of medical spending needed to provide universal coverage, beyond what is currently being spent, can be viewed from several broader perspectives:

• Relative to current government spending for public health insurance programs and the subsidization of private insurance in 2004, the additional spending to cover the uninsured is relatively small.
  
  
  • Medicare will cost $266.4 billion;
    
    
  • Medicaid will cost $280.7 billion;4 and
    
    
  • the tax subsidy for private insurance will be $188.5 billion
  
  
• The new dollars would constitute less than 3% of total personal health care spending inthis country.
  
  
• The $48 billion would increase the share of GDP going to health care by 0.4%.

<...>

[denimgirly]

7. I guess the rest of the world has it wrong -- Subsidizing Insurers and 0 REAL Cost control is IT!!

Screw Single Payer system...the way to go is subsidizing poor $billion profit per quarter Insurers and eliminating real cost control measures like the Public Option. Maybe the rest of the world has got it wrong after all these years and higher life expectancy than the U.S. A world where Insurers are happy because it means more customers at higher prices an and the public is happy because of mandates, higher prices, and less care. Sounds like another U.S. Utpopia!

[Jeff In Milwaukee]

14. I don't even know where to begin....

CMS is cutting payments to healthcare providers where a patient is readmitted within 60 days of discharge, in addition to a host of other initiatives. CMS estimates that the cost per patient will decrease by 10% over the next few years.

And I'm still trying to figure out how this is a "subsidy" to the insurance company. I have health insurance that my employer and I are paying for. Are my employer and I "subsidizing" the insurance companies and if we aren't (we're simply purchasing their product) how is it that when the government does the same thing, it's NOT purchasing a product but providing a "subsidy?"

[Recursion]

28. The problem with single payer or a public option is paying for it

The unsubsidized premium for Medicare parts A and B is $800 per person per month (that's not even including the prescription drug coverage in part D). Most recipients pay much less ($0 for A and about $100 for B) because they're subsidized by the trust fund they've paid into their whole career. Where will the money come from to subsidize everyone else's premium?

[Skink]

9. OK Nobody get sick.

problem solved.

[dionysus]

15. oh oh, watch out paul!!11!

:hide:

[Hello_Kitty]

17. Spare the drama. Dr. Krugman isn't 100% right about everything all the time.

No one is.

[Safetykitten]

18. Love the numbers game. 30 million here, 2019 there, you know if really close your eyes and think

about it, it's 2010.

[Teaser]

26. Krugman is a conservative shill

and always has been.

[depakid]

27. Tell that to all the people seeing double digit premium increases

and higher coinsurance costs.

I'm sure they'll be "impressed."