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Health Care: Cost

Editor’s note: Here are a series of articles from Greg Scandlen that talk about the health care cost estimates from different sources.

Drilling Down
Drilling down into the debate, American skepticism is well founded, as reflected in two recent reports by extremely well-respected  researchers, Steven Parente and Ronald Bachman
Steven Parente is an economist at the University of Minnesota and a principal of HSI  Network, a health economics research firm. He wrote a short article for the Manhattan Institute’s City Journal in which he estimates the real cost of the House and senate bills currently on the table would be about double what CBO estimates. He writes, “The CBO is actually being kind to the would-be reformers. Its analysis likely understates-by at least $1 trillion-the true costs of expanding health coverage as current Democratic legislation contemplates.”
How can that be? Parente explains, “The discrepancies between our estimates and CBO’s stem from our different assumptions about a key issue.”  CBO estiates only 11 million people would switch from private coverage to a “public option,” while Parente (and other researchers such as the Urban Institute) estimate it would be more like 40 million.
He further explains, “Why the difference in these estimates? We believe that we have better data on this issue than the CBO, which uses simulation models of health-insurance plans based on much older health-plan data-typically from 2001 or even 2000. Our estimates are grounded in 2006 commercial-insurance data to which the CBO doesn’t have access.”
The market and the available data have changed significantly between 2001 and 2006, largely because of the advent of Health Savings Accounts and other forms of CD Health. We now know a lot more about how people respond to lower cost coverage options than we did in 2001.
Parente concedes that both estimates are just that – estimates – and could be wrong. However, “If the House or Senate bill passes, we should know who’s right by 2014-15, shortly after the bills take effect and costs start to explode.”

Ron Bachman is an actuary with the Center for Health Transformation. He writes, “health reform in Washington has never been about health or healthcare.  It is about power.” The prospect of controlling $2.5 trillion in annual spending is delicious for Members of Congress who want to pass out goodies to their friends (and campaign contributors).
He points out that the federal government is already in control of half of all health spending in the U.S. “Yet, these government controlled programs exemplify out of control spending, waste, fraud, abuse, and the lack of modern technology that the president so confidently states that the federal bureaucracy will change once all healthcare is under their control.”
He says, “If improving health and controlling healthcare costs was the goal, why would the president and Congress ignore the non-partisan study by the American Academy of Actuaries which identified an approach (Consumer Driven health Care) where “total savings generated could be as much as 12 percent to 20 percent” and future “trend rates (are) lower than traditional plans by approximately 3 percent to 5 percent.”
He concludes, “Mr. President, show the country, employers, and voters how to successfully implement health reform before the 180 million with private health insurance who are moving towards healthcare consumerism suffer from your political Hellth Reform.”


August 7, 2009 - Posted by | Federal Government, healthcare, Uncategorized | , ,


  1. Do not fix what is not broken! Health care is not broken! Only Congress and the President is broken in their thinking and need fixing! You in Washington have told this lie for so long you now believe it to be true! Quite lieing to us and leave Health care alone!!!!


    Comment by Donald E.Whitmer | August 10, 2009 | Reply

  2. To all military active duty, and retiree’s This is a “Heads Up” on a battle we are facing now and down the road with the new Administration. The Congressional Budget Office (CBO) has already drafted proposed legislation that would
    basically reduce our TRICARE for Life benefits to a system whereby we pay deductibles and co-pays up to $6,301 the first year for you and your spouse, with future years being indexed to increase with inflation.


    Comment by Bob | August 11, 2009 | Reply

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