There’s been much discussion of the impact of the health reform bill – the NFIB and GOP Presidential candidates claiming the ACA has already caused insurance premiums to climb, while others are deriding President Obama for his statements that ACA would reduce premiums.
What’s true, and what’s BS?
One way to separate the fertilizer from the poop is to turn to independent sources, such as FactCheck. Another is to go back and see what the President actually said reform would do.
First, FactCheck. In their view, “The [health reform] law has caused only about a 1 percent to 3 percent increase in premiums, according to several independent experts.”
That finding is consistent with reports from other sources, and is based on the changes already in place due to ACA – no upper monetary limits on benefits, covering children to age 26 with no pre-ex exclusions, and no cost preventive care. There’s lots of sources in the link above that verify the 1 – 3 percent figure, including former Bush appointee Gail Wilensky.
Now on to President Obama’s blown promise that reform would reduce premiums. Let’s see what he actually said:
“On Monday I met with representatives of the insurance and the drug companies, doctors and hospitals, and labor unions, groups that included some of the strongest critics of past comprehensive reform proposals. We discussed how they’re pledging to do their part to reduce our nation’s health care spending by 1.5 percent per year. Coupled with comprehensive reform, this could result in our nation saving over $2 trillion over the next 10 years, and that could save families $2,500 in the coming years — $2,500 per family.”
I’d note that the President was making two points;
1) reform and cost reductions from stakeholders would reduce spending by 1.5 percent. Not reform alone.
2) this statement indicates the cost reduction, when spread across every American family, would equate to a reduction of $2500 per family over ten years.
Obama did NOT say that family premiums would drop by $2500 per year, and in his other statements, the President made it clear reform would reduce the RATE OF INCREASE by 1.5 points, not total spending.
That said, it is still premature for any conclusions re the impact of reform on health care premiums, other than the one noted above – initial, already-implemented measures have increased premiums by 1 – 3 percent.
That still doesn’t address why premiums went up nine percent. And I’d argue that the data indicates the differential has much more to do with insurers’ desire to generate margin than any real increase in underlying costs.

To hear the current GOP presidential candidates describe it, former Gov. Mitt Romney’s support for the 2006 Massachusetts health care reform initiative was the worst thing since the Spanish Flu.
We can chalk a lot of the hyperbole up to campaigning, but the critics raise some good points.
First, costs have gone up. That’s not surprising as more people are covered, many of whom didn’t have coverage before and therefore likely had medical issues that, once they were insured, they addressed. Moreover, Mass’ per-capita health care costs have been higher than the national average for a long time – this is a structural issue as much – if not more – than a result of reform.
Second, the individual mandate turned out to be a rather unsatisfactory ‘solution’. I’d argue that the problem with the mandate’s design was two-fold – the penalty for failing to obtain health insurance wasn’t stiff enough to drive high enrollment and the individual market was hammered by adverse selection. Some may argue that actual participation results may indicate my pessimism re the low penalty was misplaced.
In the individual market, people could enroll in, and then drop coverage at any time, resulting in some pretty serious adverse selection issues. Someone would need care, sign up for insurance, get the treatment, then stop paying premiums. This was a big problem in the individual market (and I’d argue supports my point about the inadequacy of the penalty).
There’s no question that the big problem is the cost issue – especially in today’s tough economic environment. (I’ll leave aside the ‘should government be this activist’ argument for now)
There are some pretty interesting solutions to the cost problem emerging in Massachusetts, solutions with broader implications for the country.
A couple years back the Mass Blues set up a program basing reimbursement in their HMOs in part on quality; this plan covered over a half-million members and looks to be expanding. Known as an Alternative Quality Contract, the program involves:
“A global, risk-adjusted, fixed payment per patient, with annual increases in line with inflation; and
Performance-based incentives linked to nationally-recognized measures of quality, efficiency and patient experience.”
There’s a pretty thorough description of the program in the link and it’s well worth reading.
With several years’ experience on which to build, Massachusetts’ politicians, health plans, and providers are gradually adopting new business practices, pricing models, and reimbursement methodologies designed to address long-term system costs. The legislation under consideration would put global payments in place for about a quarter of Massachusetts residents covered by Medicaid and state-subsidized insurance and state employees.
One of the more promising steps is a legislative initiative to enable/encourage global payments to provider organizations instead of the current fee-for-service reimbursement system. The concept, which is associated with Accountable Care Organizations, is based on the idea that incentivizing physicians and other providers to maintain and improve the health of members is more cost effective than paying them for each visit and procedure.
While relations between the dominant health care systems and insurers have been pretty combative, there appears to be a thaw in the air. Partners Healthcare, the largest system in eastern Massachusetts, just signed on to the program in a deal that appears to be a major win for cost cutters.
Lest we forget, the Massachusetts reform plan has achieved remarkable success in expanding coverage – a mere two percent of residents are uninsured along with less than one percent of kids.
What does this mean?
Mass’ legislators decided to pass reform first and tackle costs later. There’s no question costs have gone up, in part driven by expanded coverage. There’s also no question that providers and insurers are working together to “bend the cost curve” and their efforts look promising for both lower trend and better care.
Are there lessons we can take for the country as a whole?
Yes. Unsurprisingly, expanding coverage increases costs. But over time, stakeholders, prodded by intelligent legislation and forced to compete not on the basis of risk selection but quality and cost, can and will figure out how to control costs.

The latest meteor crossing thru the GOP presidential race firmament is Herman Cain, the Godfather of pizza.
Only in America.
As difficult as it may be, I’m actually going to attempt to take Cain seriously. Leaving aside his bizarre tax plan, one that would actually dramatically increase taxes on consumption smack dab in the middle of an economic recovery, (that’s been adequately eviscerated by others far more knowledgeable than I in the implications of tax policy) I’ll examine Cain’s rather thin health care resume and policy plans.
That said, one should note that the 9-9-9 is just an interim step in Cain’s three-step process, which concludes with a flat 30% tax on all goods and services – and no other taxes of any kind.
Cain does have a long track record on health care issues – he led the National Restaurant Association back in the early nineties and was a vocal opponent of the Clinton reform efforts. That said, his website and other public statements are long on sound bites and short on substance.
He advocates:
– treating employer and individual contributions for health insurance the same for tax purposes
– repealing the Accountable Care Act and replacing it with expanded tax credits for personal savings accounts for health care
– tort reform
– switch from the current Medicare system to some type of voucher for Medicare – how this works is uncertain as there are precious few details, but when you end payroll taxes, you end Medicare…
So what would happen with Cain as President?
Well, health care services and products and procedures and treatments would be taxed at nine percent. Yep, everything from appendectomies to pills, proctological exams, psychological counseling, and PET scans.
Next, Medicare would disappear to be replaced by some form of voucher, where people would try to by coverage from private insurers on the free market. How this would work is…uncertain. I’m not sure how many private insurers would jump at the chance to provide coverage to senior citizens with Alzheimer’s, cancer, heart disease, or osteoporosis…
What did I just write?
I should have said NO private insurers…
That’s about all we can conclude at this point. Until – or rather unless – we get more detail from the Godfather of Pizza, there’s just not enough substance to his soundbites.