On a conference call a few minutes ago, a finance committee aide said the AHIP report critical of the committee's health care reform bill will actually serve to help the legislation's chances of final passage.
"Instead of creating doubts, the report is actually having the opposite effect and has drawn a lot of ire from those who support reforms," the aide said. "Frankly, it will create a lot of momentum in the Senate to pass reform."
The insurance industry came out swinging against the Baucus health care reform bill today. (Even after Baucus and his pals at the White House kissed the industry's butts for months. Shocker, huh?) But, Rep. Weiner explained how that report actually makes the case for the public option, via DailyKos TV:
Benen: PRIVATE INSURERS LAUNCH NEW ATTACK OVER REFORM....
Private health insurers haven't exactly played a constructive and supportive role on health care reform this year. So it's not especially surprising that, the day before the Senate Finance Committee votes on a reform plan, the industry's trade association is issuing a new series of warnings.Ezra Klein: MIT Economist Jon Gruber Counters the Insurance Industry's Analysis
After months of collaboration on President Obama's attempt to overhaul the nation's health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected.Halperin described this as "AHIP Defects," but I don't think that's quite right. AHIP has been hostile to Democratic reform efforts for quite some time now -- it's not as if the insurance industry is walking away from friends and allies here. Indeed, my first instinct was to dismiss all of this as a meaningless stunt -- dire warnings from AHIP about reform falls comfortably into the dog-bites-man category.
The critique, coming one day before a critical Senate committee vote on the legislation, sparked a sharp response from the Obama administration. It also signaled an end to the fragile detente between two central players in this year's health-care reform drama.
Industry officials said they intend to circulate the report prepared by PricewaterhouseCoopers on Capitol Hill and promote it in new advertisements. That could complicate Democratic hopes for action on the legislation this week.
Administration officials, who spent much of the spring and summer wooing the insurers, questioned the timing and authorship of the report, which was paid for by America's Health Insurance Plans (AHIP), an industry trade group.
Jonathan Cohn nevertheless went through the substantive details. While some of the larger concerns -- a weak individual mandate, for example -- are legit, Cohn seems largely unimpressed with the AHIP analysis. Ezra Klein went further, calling the new research "deceptive," adding that the report "doesn't offer much in the way of trustworthy policy analysis."
The response from pro-reform policymakers is equally hostile. A Democratic spokesperson for the Senate Finance Committee called the insurance industry's attack "untrue," "disingenuous," and "a health insurance company hatchet job." A White House spokesperson added that the report is a "self-serving analysis," which is "hard to take seriously."
Front-page coverage notwithstanding, it's hard to imagine the new AHIP effort having too much of an effect in the short term.
Ezra Klein: The Insurance Industry's Deceptive Report
This morning, I wrote that "the insurance industry's analysis isn't credible, but the administration needs to get some credible numbers, or some numbers they can call credible, out there quick. The nightmare scenario is that someone more legitimate than the insurers, but still opposed to reform, beats them to it." It's a bit after 7 p.m., and the administration is now pushing its own set of numbers. That was quick.
The analysis comes from MIT health economist Jon Gruber. Gruber is, undoubtedly, pro-reform. He's advised the Senate Finance Committee and served as one of the architects of the Massachusetts plan. But he's also one of the most-respected health economists in the country. Gruber runs the numbers for an average family, a 25-year-old and a 60-year-old, looking at different income levels for each, and paying close attention to the role subsidies will play. In each case, he finds the people likely to save money under the Senate Finance Committee's plan. You can download his analysis, which is based on Congressional Budget Office data, here.
Is his analysis correct and the insurance industry's analysis wrong? Hard to say. Neither group has their model out in the open, and neither group is taking a comprehensive look at the bill's many parts (in particular, the money-saving delivery-system reforms are totally excluded). But Gruber certainly has a lot less incentive to twist the facts than the insurance industry does, and his numbers, at least, are free from any glaring deficiencies.
In the hallowed tradition of the tobacco and energy industries, the health insurance industry has commissioned a report (pdf) projecting doom and despair for those who seek to reform its business practices. The report was farmed out to the consultancy PricewaterhouseCoopers, which has something of a history with this sort of thing: In the early-'90s, the tobacco industry commissioned PWC to estimate the economic devastation that would result from a tax on tobacco. The report was later analyzed by the Arthur Andersen Economic Consulting group, which concluded that "the cumulative effect of PW’s methods … is to produce patently unreliable results." It's perhaps no surprise that the patently unreliable results were all in the tobacco industry's favor. He who pays the piper names the tune, and all that.
All that makes it a bit hard to respond to this analysis. Seriously engaging with its methodology probably gives it more credit than it deserves, making this seem like an argument between two opposing sides as opposed to a predictable industry hit job. But totally ignoring its claims means some of them might live unchallenged. So rather than a full tour through the "analysis," here are a couple of its more representative moments.
A footnote -- how come the good stuff is always in the footnotes? -- on page E-2 of the report sort of gives away the game. It reads: "Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes." That's written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.
To illustrate how this works, let's go back to another PWC favorite: tobacco taxes. Imagine Congress slaps a $10 tax on each cigarette purchased in the continental United States. The impact is obvious: People will virtually cease purchasing cigarettes, or the trade will move onto the black market. But a PWC report that "assumes payment of tax" would assume that cigarette purchasing remains unchanged, and smokers fork over $30 bazillion (approximately) in taxes. This would mark the beginning of a heretofore unknown phenomenon: nicotine bankruptcy.
At least, it would in the world of PWC's report. But it wouldn't do so in the real world. So too with these assumptions. Economists think that the tax on high-cost health-care plans will lead employers and consumers to demand cheaper plans that do more to control costs. In fact, PWC expects that, too. They just don't build it into their estimate. On Page 6, they say, "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed." That's a bit like saying although I expect to eat doughnuts this morning, I will instruct my scale to act as if I had abstained.
Or take the assumption of "full cost-shifting of cuts to public programs." What that means, essentially, is that health-care spending is considered a constant, and every dollar that a public program cuts from its payments to hospitals is a dollar the private health-care industry has to add to its reimbursements to hospitals. Have you ever heard of that before, in any industry? If Blockbuster decides to cut costs to consumers by negotiating lower payments to movie studios, does Netflix send out a sorrowful e-mail explaining that it will have to increase its membership fee because it now needs to make higher payments to movie studios?
Another interesting bit comes on Page 2, which identifies "new minimum benefit requirements that may require people to buy coverage that is more expensive than options to which they currently have access" as one of the "root causes" of coming premium increases. In the footnote, the report complains that the Senate Finance plan requires a minimum 65 percent actuarial value (that is to say, 65 percent of what an individual is expected to need), while the Massachusetts plan only requires a 56 percent actuarial value. Other states have no minimum value. Insurers will also be forced to cover preexisting conditions, have an out-of-pocket limit, and end rescissions.
It's true, as the report says, that buying better insurance will cost somewhat more than buying insurance that doesn't cover anything. The vast majority of the people affected by this will be using subsidies, of course, but put that aside for a moment. This is part of the point of health-care reform: Insurers will no longer have the freedom to offer products that let an individual think his family his protected when the policy will do nothing of the sort. That may raise prices, in much the way that antibiotics cost more than herbal supplements, but it raises prices because it reduces the insurance industry's ability to sell a deceptive and insufficient product.
But if the PWC's report doesn't offer much in the way of trustworthy policy analysis, it is an interesting looking at the changing politics of the issue. In short, the insurance industry is getting scared. After many months of quiet constructiveness, they're launching a broadside on the week of the Senate Finance Committee's vote. The White House, which had a pleasant meeting with the industry's leadership last week, was shocked by the report, and so too was the Senate Finance Committee. The era of cooperation seems to be over, and they weren't given much advance warning. But the report might have another impact, too: The evident anger and fear of the insurance industry might do a bit to reassure liberals that this plan is worth supporting, after all.
Insurance industries ambush health reform bill Oct. 12: Newsweek's Howard Fineman discusses allegations made by insurance industries that the Senate Finance Committee's reform bill will cost the consumer too much money.
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