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Running The Numbers

An interesting observation from Atrios about the president's odd lie that the Kerry health care plan will cost $7,700 per family:

According to the CBO, health care expenditures in 2002 were equal to $5,450 per capita. So, assuming Bush's numbers are correct (and who am I to question him?), bring it on baby! $7,700 per family is a hell of a lot less than $5,450 per person. The health care revolution is here! Bush is its fearless leader!
Down to brass tacks, the 2000 census said there were 2.66 persons per household, which seems like the most relevant stand-in for family size under the circumstances. Bush, then, is charging Kerry with a plan to provide universal health care to the American people at a cost of $2,894.74 per person. Right now, total US health expenditures amount to $5,450 per capita of which approximately 44 percent is public sector. In other words, the government is spending $2,398 per person under the status quo system. Kerry's "plan" would cost an additional $496.74 per person per year or (using 2000 census data) $139,793,517,586.44 per year. We'll call that a $140 billion dollar increase in annual expenditures. Admittedly, that's a lot of money (comparable to the president's health care bill) but in exchange we would (a) cover additional people, (b) provide all Americans assurance that they'll never lose their insurance, and (c) relieve individuals and employers in the private sector of $3,052 dollars in annual health care expenditures. That's a total of $855 billion per year. In other words, for every additional dollar you'd pay in taxes, you'd be saved $5 in health expenses.

I think there's no question that's a good idea. Too bad Kerry has no such plan and the president just made it up.

October 14, 2004 | Permalink

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Comments

Amen to that. As a self-employed lawyer, I have to shell out more than $13,000 annually to insure my family. I would love to cut that in half.

Posted by: Donny | Oct 14, 2004 4:34:46 PM

Clearly, there's some kind of flaw in the logic here, but I can't find it yet.

Posted by: praktike | Oct 14, 2004 4:37:01 PM

I think the flaw in the logic is subtracting the present government expenditure from the additional government expenditure that Bush as talking about. (The underlying flaw of course is talking Bush's number at face value. All his other numbers are wrong; what are the odds this one is correct?)

Another flaw is assuming that this system will replace all private sector spending on health care. I think Bush is talking about spending in addition to present government spending and present private sector spending, not instead of either.

Posted by: treetop | Oct 14, 2004 4:43:43 PM

If its insurance and if more people participated wouldn't the costs of healthcare come down?

Seems like the main reason healthcare costs are going up is that fewer companies offer healthcare to their employees and fewer people can afford to purchase healthcare.

As the pool of insured shrinks the costs are born by a ever smaller pool of people.

Posted by: D Travers | Oct 14, 2004 4:46:25 PM

Another weird moment was when Bush objected that offering the Congressional plan universally would lead businesses to stop offering health insurance themselves. This is no doubt true to some extent, but it's a weird thing to bring up because not having to pay for health insurance would save businesses money. (That's why the Big 3 auto companies, among others, are increasingly interested in some kind of single-payer type system). It would be really interesting to ask Bush why he is opposed to reducing helath-care costs for American businesses.

Posted by: lemuel pitkin | Oct 14, 2004 4:49:07 PM

I think Bush is talking about spending in addition to present government spending and present private sector spending, not instead of either.

Bush number was, allegedly, based on the $7,700 per-family cost of the status quo Congressional system that Kerry wants to allow people to buy into (or, in Bush's world, wants to pay for everyone to buy into).

So, its not, even if Bush wants it to sound that way, an additional cost, nor is there any remaining private sector cost (except whatever copays and deductibles covered individuals would still pay). Its the total cost of the plan Bush wants us to believe Kerry has.

Posted by: cmdicely | Oct 14, 2004 4:49:41 PM

Awww, I see what Matt is saying. He was a little too subtle for me. He's not taking the President's numbers at face value: he's assuming the President's statements are true to show how absurd they are.

"It's a government-run healthcare program" + "It'll cost $7,700 per family" = "We'll save five dollars for every dollar we spend."

Sorry, Matt, for focusing on the minutia and missing your point.

Posted by: treetop | Oct 14, 2004 4:51:10 PM

"As the pool of insured shrinks the costs are born by a ever smaller pool of people."

Which is exactly why Bush's proposal for medical savings accounts and catastrophe insurance is so crazy. It encourages young and healthy people to opt out of the medical insurance market, leaving only the old and sick, which increases the cost of health insurance, which makes more people unable to afford treatment.

Posted by: treetop | Oct 14, 2004 4:54:47 PM

"If its insurance and if more people participated wouldn't the costs of healthcare come down?"

How?

"Seems like the main reason healthcare costs are going up is that fewer companies offer healthcare to their employees and fewer people can afford to purchase healthcare.

As the pool of insured shrinks the costs are born by a ever smaller pool of people. "

The costs to be borne also goes down.

"Which is exactly why Bush's proposal for medical savings accounts and catastrophe insurance is so crazy. It encourages young and healthy people to opt out of the medical insurance market, leaving only the old and sick, which increases the cost of health insurance, which makes more people unable to afford treatment."

No, having young people opt out does not increase the cost of insuring older people. It simply means that the cost of insuring older people, which is currently borne in part by younger people, will instead be borne by older people.

In short, the younger people would no longer be providing a disguised subsidy to their older, costlier counterparts. The costs stay the same in any case.

You want to lower costs? Let insurance companies price according to risk the way they do in life insurance, auto insurance, homeowner's insurance, etc. This will motivate individuals to make themselves cheaper to insure, bringing the overall cost down.

Posted by: Ken | Oct 14, 2004 5:16:07 PM

You want to lower costs? Let insurance companies price according to risk the way they do in life insurance, auto insurance, homeowner's insurance, etc. This will motivate individuals to make themselves cheaper to insure,

Yup, if we raise insurance costs for old people through the roof, people will lose the incentive to grow old and stop doing it.

Reminds me of that Slate piece a while back asking why Republicans wanted to get rid of the death tax, since that would obviously increase the incentive to die....

Posted by: lemuel pitkin | Oct 14, 2004 5:45:23 PM

"No, having young people opt out does not increase the cost of insuring older people. It simply means that the cost of insuring older people, which is currently borne in part by younger people, will instead be borne by older people. * * * This will motivate individuals to make themselves cheaper to insure, bringing the overall cost down."

I see your point. We need to motivate people to stay young!

Pooling risks across generations is in your long-term best interest, Ken, since if you're lucky someday you'l be old yourself.


Posted by: rea | Oct 14, 2004 5:58:07 PM

You want to lower costs? Let insurance companies price according to risk the way they do in life insurance, auto insurance, homeowner's insurance, etc. This will motivate individuals to make themselves cheaper to insure, bringing the overall cost down.

That will work for smoking and obesity, to some degree. Maybe to an infinitely smaller degree on cancer. No chance at all on genetic diseases or aging.

I think there are few holes in your plan.

Posted by: Timothy Klein | Oct 14, 2004 5:59:57 PM

In the long term, the Rapture will hit and the righteous will be assumed into Heaven. So no worries regarding growing old.

Posted by: Kimmitt | Oct 14, 2004 6:00:09 PM

I'd really like to find out how Bush determines the statistics he pulls out of thin air. It's really quite stunning.

Anyway, I'm not so sure that I like using this type of reasoning, but let's try it for a second. If they are attacking Kerry this much over what is a plan that mostly builds on the existing system and is not government-run, maybe it's just that good.

Posted by: Brian | Oct 14, 2004 7:05:29 PM

Let's say $7,700 is wrong.

How much would it really cost to give every American the Senate health package?

A large amount of the savings of more universal healthcare comes in the form of regular checkups that detect illness when they are cheaper to treat.

A larger amount of the savings of more universal healthcare come in the form of savings of the paperwork and billing compared a system where it is not certain that a prospective patient has the means to pay for coverage.

Posted by: Ted Ronald | Oct 14, 2004 7:11:35 PM

I believe that the figure cited is the government's cost per family policy provided (that is, it doesn't include the employee's premium cost). That would be consistent with the typical plan in the US, which costs more than 9000, including both the employer's and employee's payments.

Per capita numbers aren't really relevant, since you'll note that those included in the federal plan aren't, for example, senior citizens on Medicare.

Posted by: Thomas | Oct 14, 2004 7:15:05 PM

You want to lower costs? Let insurance companies price according to risk the way they do in life insurance, auto insurance, homeowner's insurance, etc.

If you buy an individual policy rather than a group policy, insurance companies do this. Insurance companies offer group policies, at what amounts to a substantial discount from individual prices even for healthy people, to get volume business from large employers (and some other groups).

So your policy proposal amounts "allow something that the status quo policy already allows".

Posted by: cmdicely | Oct 14, 2004 7:31:59 PM

The costs to be borne also goes down.

Not so much. Those who don't have insurance are still entitled to (often more expensive) emergency service regardless of ability to pay -- and, not having routine care, have more demand for such services -- which drives up the costs which must be borne by providers, though some of the costs are covered by the public, and the additional provider costs are passed on to paying customers as part of the overhead of the provider, meaning they get bundled into higher premiums and/or out-of-pocket costs for people with insurance and/or the ability to pay for their own services.

Posted by: cmdicely | Oct 14, 2004 7:35:32 PM

Does anyone know where the $7700 figure
really comes from ? Anyway, Bush clearly
blundered here in imagining that the
average joe would hear this as being a
very high figure, when in fact many or
most of us are paying much more.

So how can this be true ? My theory is
that the demographics of senators and
congressmen are particularly favorable - they're probably mostly in the
40-60 age range, married, in good
enough health to win election, and old
enough that most children are over 18.
Plus well-educated, wealthy, and
not doing any heavy lifting at work.

Any ideas whether this is reasonable ?
Or does this plan also cover staffers,
which would give a less skewed
demographic sample ?

Posted by: Richard Cownie | Oct 14, 2004 8:04:39 PM

The plan is the Federal Employees Health Benefits Plan. It covers all federal civilian employees, not just Congress. There are a lot of options, it's not a monolithic plan. Employees pay on the order of a couple of thousand a year for a family plan (some options a lot more, but I don't think they have many enrolees). There are also copays, deductibles and other out of pocket expenses. So the total cost for a family is something north of ten grand, which is comparable to private sector plans.

Posted by: jam | Oct 14, 2004 11:19:18 PM

But the interesting thing about the federal employee health plans is that the govt does
NOT use any of its powers of govt to influence the system. They get the same deal from insurance firms as if they were a completely private firm. But it ends up being one of the best health insurance programs around for two reasons -- one is good management, believe it or not-- and two, is the power of pooling very lvarge numbers into one large insurance pool.

Posted by: spencer | Oct 15, 2004 9:21:46 AM

Hmm, I guess now I see why so many people enjoy living in Bush's made up fantasy world. The numbers are just so damn good and the plans are something you agree with so it doesn't really matter if he just completely made them up

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