Politicians, business executives, labor leaders, none of them seem to get it (or at least want to acknowledge it): Our broken health care system is the 800 pound gorilla sitting on our economy, and every year, the gorilla gains another hundred pounds. Health insurance is a massive piece of overhead cost, killing our competitiveness in the world market. The problem is not only getting worse, it is getting worse at an increasingly rapid rate. This current health care reform bill is good on coverage expansion, but extremely weak on cost control–and that is a very bad news.
We currently pay almost twice as much per capita on health care as any other industrialized nation, and that is with the US only providing insurance for roughly 83% of its citizens. We are rapidly on track to spend three if not four times as much per capita as any of the other first-world nations that we are competing against.
In 2009, the average annual cost of an employer-provided insurance policy for a family was $13,375. For the past few years, that amount has been increasing at a rate of about $1,000 per year, and the CBO projects the growth rate will not slow in any significant way.
The CBO predicts that seven years from now (in 2016), even if the Senate bill passes, an average family policy will cost $20,100 a year. That is roughly $7,000 more than it is today.
In the large group market, which is defined here as consisting of employers with more than 50 workers, the legislation would yield an average premium per person that is zero to 3 percent lower in 2016 (relative to current law).
In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law.
And most of the 0-3% reduction will be simply because the new excise tax on health insurance would result in millions of Americans getting worse insurance plans.
CBO and JCT estimate that, under current law, about 19 percent of employment-based policies would have premiums that exceeded the threshold in 2016. (Because health insurance premiums under current law are projected to increase more rapidly than the threshold, the percentage of policies with premiums under current law that would exceed the threshold would increase over time.) For policies whose premiums remained above the threshold, the tax would probably be passed through as a roughly corresponding increase in premiums. However, most employers would probably respond to the tax by offering policies with premiums at or below the threshold; CBO and JCT expect that the majority of the affected workers would enroll in one of those plans with lower premiums. Plans could achieve lower premiums through some combination of greater cost sharing (which would lower premiums directly and also lower them indirectly by leading to less use of medical services), more stringent benefit management, or coverage of fewer services.
Thus, people who remained in high-premium plans would pay higher premiums under the excise tax than under current law, and people who shifted to lower-premium plans would pay lower premiums under the excise tax than under current law—with other factors held constant. On net, CBO and JCT estimate that the excise tax and the resulting behavioral changes, incorporating the changes in premiums for employer-sponsored insurance that were discussed earlier in this analysis, would reduce average premiums among the 19 percent of policies affected by the tax by about 9 percent to 12 percent in 2016.
This means that by 2016, the new higher-limit excise tax will already start hitting many union health care plans. The excise tax also does not really control overall health care cost, it is just artificially keeping down “premiums” by forcing people to pay more out-of-pocket for their health care with higher co-pays and deductibles.
I know that some in the labor movement responded to this data by pushing to raise the limit on the excise tax again to $24,000-$25,000. Since the excise tax is not indexed to medical inflation, increasing the limit by even two thousand dollars will only slightly delay the tax from hitting a plan. With our insane expected growth rate (remember, over $1,000 a year), this increase will only protect these labor insurance plans for, at most, another 9-20 months. Of course, the possibility of the excise tax affecting labor insurance plans should be the very least of the private sector unions’ concerns.
Manufacturing in this country will not expand or even survive as long as health care insurance is an ever-growing overhead cost. I would not build a factory in this country, not when Germany, Norway, Ireland, etc., have health care growth rates a fraction of our own. Business in this country will not be able to compete internationally in 8 years if they are paying the equivalent of an extra $10,000 health care tax on each employee.
I don’t care if unions get the Employee Free Choice Act (EFCA), “card check,” or the super awesome ultimate labor organizing bill passed. (And it isn’t going to happen. If we can’t force the Senate’s 60-member Democratic caucus to pass the extremely popular public option with a huge grassroots push over the objections of one very unpopular industry, there is no way even a watered down EFCA is going anywhere in the Senate against the full opposition of corporate America.) If health care premiums keep growing, there simply will not be a private manufacturing sector to unionize.
The only hope long term for private sector unions and the rest of the American economy is to rein in our health care cost. The only way that will happen is if we destroy this 60-vote myth in the Senate. An excise tax will not really control costs, insurance exchanges will not really control costs, none of these “free market economagic” solutions will work. Peter Orszag admits these pathetic market-based efficiency reforms he is championing will take decades to realize. We don’t have decades to spare. The Federal government is the entity only big enough and strong enough to really bring down health care costs.
The public option may seem small. The weaker version’s cost-controlling component, while in the tens of billions, is still less than I hoped for. The important thing though is that if a real public option is part of the final bill, that means Congress stood up to one of the extremely well-funded lobbies in our health care system, and used governmental power to rein in waste and profits. If we can get Congress to do it with one segment of our health care industry, we can eventually force them to do it with the others.
I hope the private sector unions don’t try to cut a short-sighted deal to stay on some senator’s good side. If they trade away the public option, they are trading away the only hope we have had in years to use the government to give regular Americans the upper hand against large corporations. And the worst part would be that the private sector unions would be trading it away for, at most, only a few months’ reprieve of their death sentence.