Buyer Beware On Obamacare
WASHINGTON – President Barack Obama is the insurance industry’s most powerful pitchman these days as he drums up interest in the health insurance markets opening for business Tuesday. Whatever the merits of his product, there are reasons for the buyer to beware of his rhetoric.
The president is being a bit slippery on the costs of coverage, in particular.
His opponents are taking their own liberties as they talk up the ills of Obamacare and defend their approach to the budget impasse that threatens to close non-essential parts of the government come Tuesday.
On these points, let the buyer beware:
OBAMA: “Knowing you can offer your family the security of health care, that’s priceless. Now, you can do it for the cost of your cable bill, probably less than your cellphone bill. Think about that, good health insurance for the price of your cellphone bill or less.” – Speech in Largo, Md., on Thursday.
THE FACTS: The family coverage you can get for the cost of a monthly cable or cellphone bill is going to expose you to a hefty share of your medical expenses. Looked at in terms of digital communications, it’s more like dial-up Internet than 4G.
The cell-phone analogy has become the talking point of the week for administration officials pitching people on the health care markets opening for business Tuesday. Obama said earlier that of every 10 Americans who are uninsured, “six out of those 10 are going to be able to get covered for less than $100 a month, less than your cellphone bills.”
He is referring to the cheapest of four major options offered by the new markets, the “bronze” plan. But, just like with auto insurance, premiums aren’t the only potential expense for a consumer. Those who choose bronze will have to pay 40 percent of their medical bills out of pocket through deductibles and copayments. A family’s share of medical costs could go as high as $12,700 a year, or $6,350 for individuals, on top of those cell-phone-like premiums.
Plans that cost more in premiums have the same caps on annual out-of-pocket expenses, but they cover more of the bills along the way. The platinum plan, which is the best, pays 90 percent of medical bills, for example.
OBAMA: “Premiums are going to be different in different parts of the country depending on how much coverage you buy, but 95 percent of uninsured Americans will see their premiums cost less than was expected.” – Largo, Md., speech.
THE FACTS: Less than who expected? Obama is referring to an administration analysis that finds premiums are coming in 16 percent lower than had been estimated by experts at the nonpartisan Congressional Budget Office. Independent analysts find similar results. But it’s a stretch to suggest that numbers crunched by CBO’s experts would reflect the expectations of regular consumers.
The new insurance markets are for people who don’t have access to coverage on the job. Many will have been uninsured, and they may be surprised when confronted with potentially significant out-of-pocket costs in addition to their monthly premiums. People in the other big group of customers now buy their own individual policies. Although many consumers will qualify for tax credits to offset their premiums, they are likely to pay more than now because they’re getting a better product.
REP. KEVIN McCARTHY, R-Calif.: “When we started this health care debate, the president led with a very big promise to the American people: If you like the health care that you have, that you currently have, you can keep it.” – At a Sept. 20 House Republican rally after passage of the bill that would finance the government on condition the health care law is starved of money.
HEALTH AND HUMAN SERVICES SECRETARY KATHLEEN SEBELIUS: “The big employers are already in the market. Their plans won’t change, and actually that’s one thing that we need to remind everybody. If you have insurance with your employer that you like, if it works for you, if your employer is a state or city government, a large employer, if you’re in Medicare, if you have veteran’s benefits, your patient protections are already in place. Nothing changes in this new market.” – CNN, Thursday.
THE FACTS: McCarthy is correct, Obama said exactly that. It was an empty promise, made repeatedly. Sebelius picks her words more carefully but still offers misleading assurances.
Nothing in the health care law guarantees that people can keep the health insurance they already have. Costs can rise, benefits can change and employers can drop coverage.
Insurance policies that are offered must now meet minimum standards, covering more preventive services, for example, and larger employers that don’t offer insurance to workers will face penalties when that provision of the law, delayed by Obama, comes into effect. But that doesn’t mean the status quo goes on for those who like what they’ve got now.
Some larger companies are already curtailing their coverage to avoid taxes that start in 2018 on high-value plans, those worth $10,200 or more for individual coverage and $27,500 for family policies. The AFL-CIO, whose member unions had supported the law, now says it is being implemented in a way that is “highly disruptive” to some union health plans.
Continuing a long-term trend, many companies are shifting more costs to employees through higher premiums, deductibles and copayments.
Sebelius is on firm ground in stating that “your patient protections are already in place” because the law contains a range of new protections against lifetime caps on benefits, overly discriminatory pricing and more. But “nothing changes” for those with good insurance? Not so. The landscape is already shifting.
OBAMA: “Our deficits are now coming down so quickly that by the end of this year, we will have cut them in more than half since I took office.” – Sept. 20 speech at Ford plant near Kansas City, Mo.
THE FACTS: Yes, but.
When Obama took office in January 2009, the deficit he inherited was $1.4 trillion. The Congressional Budget Office recently estimated it will be $642 billion for the budget year ending today, down by roughly half since Obama became president.
An estimated $78 billion of that deficit reduction comes from automatic across-the-board spending cuts, called sequestration, that began taking effect in March – over Obama’s protests. As well, tax increases early this year have brought in more revenue. The economic recovery also has resulted in higher tax payments.
Deficits, though, don’t tell much about the country’s total indebtedness because they only represent a one-year comparison of revenues and spending.
While annual deficits are declining, the national debt – the accumulation of deficits going back to the days of George Washington – is still rising. It stood at $10.6 trillion the day Obama took office. It’s now $16.7 trillion, according to the Treasury Department’s Bureau of the Public Debt.
Thus, the national debt has increased by $6.1 trillion under Obama – the largest increase to date under any president, and a reflection in part of the deep recession early in his first term.
OBAMA: “Raising the debt ceiling is not the same as approving more spending, any more than making your monthly payments adds to the total cost of your truck. You don’t say, ‘Well, I’m not gonna – I’m not gonna pay my bill, my note for my truck because I’m gonna save money.’ No, you’re not saving money. You already bought the truck, right? … So raising the debt ceiling, it doesn’t cost a dime. It does not add a penny to our deficits. ” – Speech at Ford plant.
THE FACTS: Raising the debt ceiling is not the same as a consumer merely making monthly payments on existing debt. It’s very much like a consumer getting approved for a higher cap on a credit card. It doesn’t mean the consumer will necessarily spend more, but it makes higher spending possible.
In the government’s case, it has to have a higher credit limit so it can keep borrowing to make necessary payments. Borrowing to pay interest on existing debt as well as the bills is a recipe for deep trouble for consumers. But governments don’t – and really, can’t – handle their budgets as typical households do, despite the kitchen-table analogies that politicians in both parties love to make.