But Was the AHIP Study Accurate?

By October 20, 2009Health Care

President Obama used his Saturday radio address to attack the insurance industry for opposing the White House’s demands for government-expanding reforms to the U.S. health care system. Included in his populist rhetoric was a denunciation not just of the conclusions of the America’s Health Insurance Plans’ (AHIP) study of the costs of health care proposals but also of the group’s motives.

  • “We’ve seen industry insiders – and their apologists – citing these studies as proof of claims that just aren’t true.”
  • “It’s smoke and mirrors. It’s bogus. And it’s all too familiar. Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, ‘Take one of these, and call us in a decade.'”

Today Karen Ignagni, president of AHIP, responds in a Washington Post op-ed, “About that health-reform cost study“:

The report’s central finding has long been noncontroversial in health policy and economic circles: namely, that implementing reforms of the insurance market without a strong requirement that everyone participate will cause adverse selection and significantly increase costs for individuals and small businesses. This finding echoes the message President Obama delivered in his address to Congress last month. “And unless everybody does their part, many of the insurance reforms we seek — especially requiring insurance companies to cover preexisting conditions — just can’t be achieved. And that’s why under my plan, individuals will be required to carry basic health insurance,” he said.

The report concluded that the proposed new taxes on health plans, pharmaceutical manufacturers and medical-device makers will increase the cost of coverage. These findings are entirely consistent with the judgment expressed by the director of the nonpartisan Congressional Budget Office, who recently told the Senate “that piece of the legislation would raise insurance premiums by roughly the amount of the revenue collected.”

When the NAM commissions studies, we do so in good faith, and we assume the insurance association behaves no differently. Mandates and taxes are going to raise costs to the consumer — obviously.

So the question is, which study is better? Should we believe AHIP, the CBO, President Obama or somebody else? Add up the estimates and average them out? Or would we be better off using the entrails of fowl to divine future costs?

The Wall Street Journal today concludes that believing the federal government’s cost estimates is historically a mistake. From “Health Costs and History“:

Washington has just run a $1.4 trillion budget deficit for fiscal 2009, even as we are told a new health-care entitlement will reduce red ink by $81 billion over 10 years. To believe that fantastic claim, you have to ignore everything we know about Washington and the history of government health-care programs. For the record, we decided to take a look at how previous federal forecasts matched what later happened. It isn’t pretty.

The Journal reports, among other historical facts:

  • The Medicare program for renal disease was originally estimated in 1973 to cover 11,000 participants. Today it covers 395,000, at a cost of $22 billion.
  • The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected.

Challenging some group’s motives often makes political sense, although it’s hard to see how targeting one in a national radio address elevates the debate. But in assessing the costs of the current health care proposals — the real issue here — we’ll let history be our guide.

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