Obama Promised $2,500 in savings?

Where’s the $2,500 Savings Obama Promised?

Throughout his campaign, then-Candidate Obama repeatedly made two promises about health care reform: that if you like your current health plan, you could keep it—and that it would cost about $2,500 per year less. Obama made this pledge on his campaign web site, in the second presidential debate, and in the third debate, :

“If you have health insurance, then you don’t have to do anything. If you’ve got health insurance through your employer, you can keep your health insurance, keep your choice of doctor, keep your plan. … And we estimate we can cut the average family’s premium by about $2,500 per year.”

One continuing theme in the current health care debate has been over whether you will actually be able to keep your plan if any of the current bills in the House or Senate pass.

But what about the $2,500 in savings?

There is nothing in any of the current health care reform proposals that would produce anything like that savings, or even any savings at all.In fact it does just the opposite.

A study by John Shiels and Randy Haught of The Lewin Group estimates that the average private insurance premium—the cost of the health insurance you have right now—will actually go up, not down, costing the average working family $460 a year more. That figure accounts only for cost-shifting that they assume will occur because the new “public plan” will pay doctors and hospitals less than they receive now from private insurers, and in some cases less than the cost of providing health care service. In reality, the cost increase might be much higher, because a new “Health Choices Commissioner” will have the authority to mandate coverage of more services than your current plan – in which case you will not be able to keep your plan, and the plan with that extra coverage will necessarily come with a higher premium.

Doug Mills/The New York Times

The closest the House bill (H.R. 3200) comes is to provide some income-based subsidies to purchase health insurance. These would apply only to those who both don’t have employer-sponsored insurance and who have incomes below four times the federal poverty level. They are designed to limit the percentage of income that an eligible family would spend on the “basic” government health insurance package in the new “public plan,” to 1.5 percent to 11 percent of income, depending on how close the family is to the federal poverty level. But this is not for the insurance you have now, it’s for government-run insurance “standard” insurance package (similar to Medicare only with much higher premiums). And the subsidy is not “savings for the average family,” it is just shifting part of the cost of insurance from some families to other families—the ones who pay the taxes necessary to fund the subsidies.

Health Care And The Federal Budget, US - The Committee for a Responsible Federal Budget

The Committee for a Responsible Federal Budget released "Health Care and the Federal Budget," documenting the alarming state of the U.S. health care system with a special focus on the role of health care in the federal budget.

With national health spending totaling around $2.5 trillion in 2009, and projected to grow to $4.4 trillion by 2018, there is obvious cause for concern that health care spending is out of control. This is especially true given that over a third of health care spending comes from the federal government (outside of the tax system), and these costs are driving the country toward fiscal disaster.

With over fifteen percent of the population uninsured, a major goal of health care reform has been to expand insurance coverage; this could greatly increase government spending on health care. Measures to achieve this must be accompanied by offsetting tax and spending changes as well as credible efforts to control costs.

The federal budget already faces serious structural deficits that stem from government promises outweighing revenues. Adding health care spending into this mix, without a proportional and broad based commitment to pay the taxes necessary to finance new spending, would cause the budget outlook to deteriorate even further.

More importantly, unless key changes are made in health care delivery and payment systems, costs will continue to rise rapidly and quickly reach untenable levels. Absent significant cost controls, Medicare and Medicaid will double as a percent of GDP by 2035, and consume as much as we typically raise in total revenue by 2080. That type of growth will place serious constraints on the economy's ability to meet alternative needs of the population and make it that much more difficult to improve overall standards of living.