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As I was getting up this morning I turned on the radio. I was hoping for a weather forecast. Instead I got Representative Ann Wagner giving the Weekly Republican Address.
Wagner started by quoting Obama’s 2008 campaign promise to cut premiums for health care by up to $2,500. She saw this a a broken promise based on the recently released report by the Centers for Medicare and Medicaid Services on the premiums for those employed in small businesses. The violation was that premiums were going up for 11 million individuals.
The report was release a week ago and comments and arguments have been going back an fourth for the past week. See here and here for a couple of examples. But what Wagner has to say requires closer scrutiny.
First off Obama’s promise was not well respected when he made it. It seemed like a considerable overestimation of the savings that could be achieved. And Politifact.com listed it as a broken promise back in 2012.
But what exactly did he promise? Well Jay Forest has put together a series of clips of Obama’s various statements while on the campaign trail. He has done us a real service since seeing the videos as a group lets us see what Obama was trying to say. He did not say it the same way every time. Focusing only on what he seemed to repeat again and again the core of the promise was to (1) he had a plan, (2) work with employers, (3) reduce premiums, (4) the reductions would be up to $2,500 for a typical family. Wagner’s version of the promise was to sign a health care law that would “cut the cost of a typical family’s premium by up to $2,500 a year.” I did not see anything where he promised to sign such a law – so Wagner is exaggerating a bit. Regardless of how one reads the promise it really was not much of one. “Up to $2,500” can be anything from zero up to $2,500. And what makes for a “typical family?”
Wagner is stretching the logic to make a claim that the report on the impact on premiums on small business provides evidence of a break in Obama’s promise. Just for starters can we claim those are typical workers? As I read the report they are clearly not. As the report claims and as the CNN report picked up on, small businesses tend for some reason to hire younger and healthier workers than average.
This is important because the Affordable Care Act require some averaging of premiums. Age cannot be factored in as it had been earlier. Health of the workers cannot be factored in as it had been earlier. And preexisting conditions can no longer be excluded. These features tend to force premiums towards the mean. They should reduce the variance in health care cost that exist for a whole set of reasons. Firms where workers or their families had significant medical issues were paying higher premiums. This in turn put them at a disadvantage in competing with other firms not so burdened. Premiums went up on average at least partly because the small businesses with younger and healthier workers were no longer put in such an advantageous position. They also went up because of the new preexisting condition clause in the act. Firms with older workers would expect to see their premiums decrease.
As with any change in technology, law, or practice there are winners and there are losers. Any change to the health care system will see winners and losers. The same is true in the premiums workers and employers will pay under the Affordable Health Care Act. While Wagner was happy to point out the estimated 11 million individuals who’s premiums will go up. She ignored the estimated 6 million individuals that will see a decrease in their premiums. A shortcoming of the report is that while it reports on how many will be impacted it does not tell us how much the premiums will change.
But perhaps Wagner’s biggest statistical blunder was letting the tail wag the dog. What is going on with the approximately 17 million individuals talked about in the report cannot really be used to argue a broken promise (or supposed promise – depending on how you view what Obama actually said) as it applies to the county as a whole.