AHIP's newest complaint – Full read

OK, now I’ve read the whole thing.  And I think that most of my initial thoughts are still fine.

Let’s start by my saying that I think it’s important to allow for the fact that independent reviews of the bill are a good idea.  There is no reason to take one viewpoint (The CBO for example) as the only credible source.  But as with any scientific analysis, the the most critical thing to evaluate is the methods.  And there are some issues with the assumptions made that should give everyone pause.

The biggest problem with the report, as noted by others as well, comes in the form of footnote #4 on the bottom of page E-2:

Impact assumes payment of tax on high-value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes.

The analysis therefore assumes that that all the measures intended to change behavior and incentivize people to shop for lower cost plans will completely and utterly fail.  In other words, when faced by a new tax on high cost plans, rather than try and find cheaper plans (or rather than insurance companies try and find ways to make them cheaper), people will just accept higher and higher costs.  The analysis also assumes that any savings to public programs like Medicare and Medicaid will be passed entirely and wholly to private insurance premiums.  That’s not the way the real world works.

In the real world, if you don’t find a way to reduce the price, fewer people buy your product.  Or, in the case of health care, everyone in the system will ideally work to try and bring costs down.  When Medicare reimburses less, the entire loss isn’t shifted to private insurance.  Some is absorbed by hospitals, some by physicians, some by patients, some by pharma, etc.  It’s not like the only one suffering is private insurance companies.  They are still doing just fine.

My biggest issue, however, is that the report seems to be admitting, up front, that there is no way for private insurance companies to absorb any changes to the health care system except for passing on all costs to the consumer.  In essence, they are admitting that they can do absolutely nothing to contain costs or streamline their operations.  This is exactly why some people feel like we need a public option, to force private insurance companies to “innovate” and compete.

This report seems to be making that exact same argument, giving supporters of the public option a lot of ammunition.  It also may galvanize people in ways that AHIP did not intend.  I’m not an expert on politics, but this doesn’t feel like a great play on AHIP’s part.  We’ll have to see how this plays out.

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