2010 January 26 Tuesday
Obama Medical Plan To Raise Costs

If Obama manages to get his health care plan approved medical costs will probably rise even faster.

If you're thinking the legislation will tamp down overall health care spending, reconsider. Policy analysts ranging from the neutral Congressional Budget Office to the HMO lobby see no abatement in the growth rate of health care spending. That sector of the economy is growing at a 7.4% annual rate, says actuarial firm Milliman. Medicare's chief actuary, Richard Foster, thinks that the Senate bill would expand health spending by $234 billion above current projections.

The amount of cost shifting onto private plans will rise.

The premium hikes will result from cost shifting, better known as passing the buck. The House and Senate insurance bills aim to cover their costs in part by cutting annual Medicare reimbursements to hospitals, doctors and drug companies by $45 billion. Those providers will likely try to offset the cuts by negotiating higher rates with private HMOs--which then get passed along through higher premiums. That's exactly what occurred after past Medicare and Medicaid cuts, according to the CBO analysis. Families USA, a nonprofit group advocating expanded federal involvement in health care, says insured families are already absorbing $1,000 a year in costs shifted away from uninsured patients.

People who buy medical insurance on their own will be hardest hit because the individual insurance market won't be able to deny coverage due to pre-existing conditions. So some will wait to buy insurance until they get seriously ill and those people will get paid for by those who pay all along. Read the full article for estimates of how much premiums will rise. Individuals buying their own insurance might pay as much as 53% more. Employers won't be hit as hard as individuals. The more powerful and more organized manage to shift costs toward the less powerful and less organized.

People who make less money will be even more subsidized by the most productive. That's a more general trend that makes me worried for the future.

Share |      By Randall Parker at 2010 January 26 10:47 PM  Economics Health

not anon or anonymous said at January 27, 2010 11:24 PM:

It's almost as if destabilizing, cost-raising, intervention-begging policy was the plan all along. Huh.

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