Thursday, July 30, 2009

CBO's Gift to Dems: A Closer Look


By INVESTOR'S BUSINESS DAILY | Posted Tuesday, July 28, 2009 4:20 PM PT

Health Care: The people who debunked the cost-saving claims of ObamaCare have come back with a seemingly reassuring review of the "public option." But the devil is in the assumptions.

IBD Exclusive Series: Government-Run Healthcare: A Prescription For Failure

Democrats promoting a new government health insurance plan got some good news, for a change, from the Congressional Budget Office this week. The nonpartisan fiscal scorekeeper sent a letter to Dave Camp, the top Republican on the House Ways and Means Committee, in which it rebutted the claim that the so-called "public option" would drive private insurers out of business.

Most people with job-based private plans would keep them, the CBO said, though it did note that "estimating enrollment in the public plan is especially difficult."

Indeed it is. But House Democratic leaders wasted no time in declaring victory in the analytic wars. "Now we've heard that the reform will represent a government takeover of health care," said Majority Leader Steny Hoyer. "A point of fact: The opposite is true."

The real point of fact, as noted by more impartial observers, is that the rival scenarios for the future of private insurance rest on differing assumptions about the future pricing and eligibility rules for the government plan.

An earlier analysis by the Lewin Group, a private consulting firm owned by the health insurer UnitedHealth Group, estimated that more than 100 million people would eventually move to the public plan. The CBO puts the total much lower, at about 9 million. It also says about 12 million would be added to private plans because of the proposed new mandate that employers provide coverage.

Essentially, the Lewin study foresees radical change — a true government takeover. The CBO says that, for most employed Americans, not much is going to change.

Why the huge gap? One answer is that the assumptions of these studies differ in two key areas. One is pricing. The Lewin study assumes that the public plan's premiums would be about 20% below those of private plans. The CBO assumes a discount of just 10%.

The other crucial difference regards eligibility. Lewin assumes that all employees would eventually be able to jump to the public plan, no matter how large their employer. The CBO assumes that workers at firms of more than 50 employees would be barred from that choice.

As we (and the CBO) have noted, it's hard to predict the future behavior of employers, employees and the government around the year 2015, when the health care overhaul envisioned by the current House bill is to be fully implemented. But we can say this much: The motivation behind the public plan will have a lot to do with how things turn out.

If the government really means to keep the public "option" just that — one of many options in a competitive exchange dominated by private players — it can do so. If the real agenda is to engineer a transition to single-payer public coverage, it can do that too. Both courses are possible under the House bill, which of course can also be revised in coming years.

It all boils down to a question of trust. If you take President Obama and other backers of the public plan at their word, the plan is supposed to be priced to cover its true costs and is not meant to supplant plans offered by larger employers. It's also supposed to keep private insurers "honest," as the president puts it, by serving as a model of efficiency — not by trying to price them out of business.

The CBO, for its part, has no choice but to trust the language of bills and their sponsors. Its assigned role is to judge legislation as written, not as it might turn out in practice. It's up to others to scrutinize political motives and judge how they would influence the future course of health care.

One can get a clue about those motives by seeing how relentlessly Big Labor and the left wing of the Democratic Party push for the public plan. For them, the public option sketched out in the House bill is just a first step. After all, it would make little sense for unions, representing mainly large-employer work forces, to push for an option that would be unavailable to most of the members.

Leading Democrats can claim that a government takeover isn't in the cards, but the party's base has different ideas. It's waiting for an opening, and the public option would give it one.

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