It has been almost a week since the health care reform legislation became law, but one thing that hasn’t changed is the growing concern over the new law’s impact on premiums and people’s health care costs.
In fact, the Associated Press released an analysis from the RAND Corporation today which showed that premiums for young people in their 20s and early 30s will dramatically increase. From the AP story:
Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans – a shift expected to raise insurance premiums for young people when the plan takes full effect…premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press…The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.
And it’s not just RAND saying this will happen, the AP also reports that other experts are arguing that premiums will increase for younger individuals as well. Jim O’Connor an actuary for independent consulting firm Milliman, Inc. estimates that young males will see increases between 10-30 percent. O’Connor says “Young males will be hit the hardest”.
While premiums rise for younger folks, it must be good for other working families and employers right? Well not so quick according to AEI’s John Calfee. Calfee writes in Forbes “The first thing ObamaCare will do is increase insurance costs.” Calfee goes on to point out some serious concerns with the approach in the new law to control premium increases — price controls. Calfee argues:
Insurance premium price controls cannot do much good. States that already review or control premiums show that premiums are driven by costs.
And Calfee warns this is even before 2014 which he argues is when “Pressure on premiums will become more intense.” Why? Simple: a coverage requirement that is too weak. Calfee writes “In the crucial individual insurance market, the penalty for failing to purchase insurance will be only $95 or 1% of income (whichever is more) in 2014, $325 (2.0%) in 2015 and $695 (2.5%) in 2016.” What will happen then — “With healthier consumers opting out of the insurance risk pool, premiums will escalate–probably a lot.” (Our emphasis.)
This leads Calfee to conclude:
There are good reasons to worry that come 2015, the nation will be immersed in a crisis of uncontrolled costs and rising insurance premiums. After all, the reform package is essentially devoid of powerful cost control.
Devoid of powerful cost control? That is strong language and can’t be right can it? The New York Times has a special section today on the new health care law, and one article seems to backup Calfee’s assertion. In the article by the NY Times’ Gina Kolota “Law May Do Little Little to Help Curb Unnecessary Care” it is clear that the new law lacks real tools to deal with the 30 percent of health care spending that is wasteful or does nothing to improve quality. Kolota interviews doctors and economists and they seem to agree (although in fairness some say the law takes an important first step) that “the new health care legislation…is not going to make a bit of difference.” Kolota continues:
To truly change the nation’s chronic overuse of medical care, there will have to be a substantial change in the way patients think about health care, how medicine is practiced and how it is paid for, economists and doctors say. The legislation does little to help in those areas.
So where does the legislation come up short the most? According to the article “But the law in no way forces patients or doctors to choose one test or treatment over another or to aim for the cheapest alternative. And it does nothing to change the reimbursement system, in which doctors often make more money if they order more tests, for instance.”
Even doctors are concerned about the lack of cost controls and ways to turn the system more toward value then volume. Check out this quote from the end of the story from one doctor interviewed:
“I really believe that in our heart of hearts most doctors want to curb this. We know what we are doing. And we are frustrated, too. But we can’t help ourselves. There is nothing to stop us and nothing to be gained by stopping.“
These stories may be why the new law has not changed people’s perspective with respect to what they think the impact will be on their costs and costs to the nation, at least according to the latest Gallup poll.
According to Gallup, “One week after the passage of historic new healthcare legislation, Americans remain worried about the bill’s effect on costs — both for the nation as a whole and for them personally. A majority of Americans say healthcare costs in the U.S. and the federal budget deficit will get worse as a result of the bill. Half of Americans believe that healthcare costs for themselves and their families will get worse.”
