Compartmentalization

The Congressional Budget Office recently released their scoring of the Senate Health Care Bill. Reading some of the headlines in major newspapers, one would be forgiven to think that the health care plan being debated in the Senate is a deficit reducing panacea for all of the United States’ health problems… “No Big Cost Rise in U.S. Premiums Is Seen In Study” touts the New York Times, for example. The health care bill is supposed to ‘bend the health care cost curve‘ and extend coverage to the unfortunate people who don’t currently have insurance. Sadly, it completely misses the mark.

Whoops…

For the 5/6 of the current insurance market who get their insurance through their companies, not much would change between the current estimated health care premiums and the costs under the bill. Employees at larger companies would see their premiums drop 0-3% from the current projections. Employees at smaller companies would see their premiums increase 1% or fall by up to 2% from projections. So far, these CBO estimates don’t seem too bad.

How about the 1/6 of the population that buys their health care individually today? Their premiums will increase 10 to 13% from the current estimated premiums. Well, it’s only 1/6 of the market, right? Yes, but only until the bill is passed. This is the segment of the market where the people who aren’t currently covered by insurance will enter the market. Yes, there will be subsidies to help people pay (57% will receive subsidies in this category). However, is increasing the premiums of the segment of the market where we want them to get cheaper the best way to go about it? Is the cost curve bent?

The Cost Curve

One CBO quote proves that the cost curve does bend as a result of the bill:

“As explained below, some provisions of the legislation would tend to decrease or increase the premiums paid by all insurance enrollees, while other provisions would tend to increase the premiums paid by healthier enrollees relative to those paid by less healthy enrollees or would tend to increase the premiums paid by younger enrollees relative to those paid by older enrollees.” - Congressional Budget Office scoring of the Patient Protection and Affordable Care Act

The health care bill, in summary will:

Not change the predicted health care premiums significantly for employees of large companies
Not change the predicted health care premiums significantly for employees of small companies
Increase the cost of health insurance purchased directly from insurance companies
Shift the costs of health care from older enrollees to younger enrollees
Shift the costs of health care from unhealthier enrollees to healthier enrollees
Attempt to patch the ill effects through subsidies

Is this a good bill? How about when compared to this chart, detailing the median weekly wage by age group in the third quarter of this year. (From BLS data)