Washington is all atwitter (a word coined in 1833, but with new meaning in the 21st century) over the Congressional Budget Office scoring of the health bill introduced in the House recently. As has been pointed out, the CBO has a terrible track record when it comes to predicting the future ten years out. It predicted far higher enrollment in Obamacare than came about, so why should we put any faith in its prediction of lost coverage under the new health bill?
When it comes right down to it, of course, ten-year projections aren’t worth the powder to blow them up, as a simple thought experiment shows. Had the CBO existed in 1928, how accurate do you think their ten-year projections made that year would have been?
The CBO also badly missed the mark when it came to Medicare Part D (drug coverage) that started in 2006. The CBO estimated that in the first year there would be 7 million enrollees. There were 24 million. And while the CBO is notorious for underestimating future costs of government programs, it overestimated costs ten years out for Medicare Part D by a whopping 40 percent.
The main reason costs came in much lower than expected is that Medicare Part D allows insurance companies providing the coverage to compete with each other in terms of price. What a concept! That’s why every fall, during the period when people can enroll, drop out, or change providers, television is crawling with insurance company ads trying to entice customers to their Medicare Part D coverage.
When was the last time you saw an ad for regular health insurance? Exactly never. There is no price competition in the health insurance market, which goes a very long way to explaining why medical costs keep ratcheting up. So the elephant in the room of health insurance reform, the elephant that almost everyone in Washington is studiously ignoring, is the lack of price discovery.
As former senator Tom Coburn (a physician by training) explains, as long as the costs of medical procedures are kept secret, no health insurance reform is really possible. Make health care providers post their prices, and those prices, now wildly disparate, will quickly begin to converge towards the low end once customers can find out where they can get a better deal.
The problem, of course, is that insurance companies and hospitals don’t want prices to be public and they are both very powerful lobbies in Washington. Welcome to democracy.
