Will the Health Care Bill Cut Costs?

Democrats and Republicans are taking opposite conclusions from a Congressional Budget Office report

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Yesterday's Congressional Budget Office report on the Democratic health care bill in the Senate has spawned a multitude of conflicting interpretations. The central question is this: does the CBO report show that the bill will raise premiums--and thus costs--for the average family? Conservatives say yes, latching onto a predicted rise in premiums for those in the individual market. Liberals, however, are finding items in the report which they say amount to an endorsement of the bill. Here's the rundown on the key arguments, as well as a suggestion from Politico blogger Carrie Budoff Brown on what the overall debate means for the Democratic bill:

  • Report Shows Bill Will Cost Families a Lot  The National Review's Michael Tanner takes a look at the predicted 10-13% increases in premiums for non-group insurance buyers: "Those increases," he writes, "are over and above the increases that would occur if we did nothing." When added to the "tax increases contained in the bill" and the cost for those switching to "more expensive plans" according to "government-designed minimum requirements," he thinks the matter fairly settled: the Democratic health care bill will be expensive for a lot of families.
  • Watch for Republican Spin  Talking Points Memo's Brian Beutler, though, says that there are "two separate findings" from the CBO--the 10-13% increase in individual market premiums and the second finding that "most people (about 57 percent) would actually find themselves paying significantly less money for insurance, thanks to federal subsidies." He predicts that "Republicans will use the former finding to attack reform ... and leave people confused about the second finding, which is actually the one that impacts people's pocket books"
  • CBO Supports Democratic Bill--What Are They Talking About? Paul Krugman goes a step farther, declaring that the bill says "premiums would stay about the same for people with group coverage, while falling significantly for most of those in the small-group or individual markets." He thinks the Republicans saying it shows premiums will rise "suffer from reading comprehension."
  • They've Got a Point, insists the Atlantic's Megan McArdle, calling Krugman's interpretation "very odd": those saying premiums will rise "are saying this," McArdle explains, "because this is, in fact, what the CBO report says:  average premiums will be higher.  People may be getting more value for their money," she notes, "but there's still more money leaving their wallet every month." Pointing out that, either way, the CBO's "strength is consistency, not accuracy," rendering their predictions fairly imprecise, she offers the following analogy for understanding the debate:
One way to think about it is to compare it with catalytic converters, airbags, anti-lock brakes, and so forth.  If we mandate that everyone get them, the cost of new cars will rise.  But because of economies of scale, the price of new cars might rise by less than it would cost to add these things as options on an individual car. 

So did the price of new cars go up?  I'd say it did.  But you can also correctly point out that now everyone has antilock brakes and airbags, which are valuable things; it's not as if the price of the new car just went up with no added benefit.  Even so, I'm not sure how much sense it makes to do a straight extrapolation back to the old price of cars pre-mandate, and thereby claim that you have actually made cars cheaper.

Obviously, the question gets further complicated if you subsidize 10% of new cars.
  • The Debate Itself Is a Democratic Win  Politico's Carrie Budoff Brown cuts through the noise to say that the CBO report, by "provid[ing] as much fodder for Democrats as it did for Republicans, effectively [blunted] the study as the kind of game-changer critics had wanted." Some Democratic Senate aides, she says, had worried the report would be much more damning.
This article is from the archive of our partner The Wire.