New LSU “Jobs” Study Raises More Questions Than It Answers

The release by the Louisiana Department of Health late Friday afternoon of an updated study showing the jobs benefit of Medicaid expansion concedes an important point pointed out by the Pelican Institute over 16 months ago. This year’s study admits that the 2018 paper over-counted the federal dollars and jobs associated with Medicaid expansion, because it failed to subtract for the many people who forfeited federal subsidies when they transitioned from Exchange coverage to Medicaid after expansion.

However, the researchers have yet to offer an explanation—or a retraction—of their inflated claims in last year’s paper. Nor have the Department of Health and LSU begun to answer the many questions about the circumstances surrounding these flawed studies.

While correcting one error, this year’s study also contains other questionable claims and assumptions:

  • The 2019 study discusses substitution effects, whereby federal Medicaid dollars merely replace other forms of health care spending. However, unlike a Montana study in which the researchers cite in their work, the Louisiana paper apparently does not quantify instances where federal dollars substituted for dollars previously spent by individuals or employers—thereby inflating the supposed impact of Medicaid expansion. That apparent omission also means the researchers did not quantify the number of people who dropped private coverage to join Medicaid expansion—which internal Department of Health records suggest is larger than the Department has publicly admitted.
  • The 2019 study claims that the federal dollars attributable to Medicaid expansion declined by only 4.4% from Fiscal Year 2017 ($1.85 billion) to Fiscal Year 2018 ($1,768 billion). Yet, the number of jobs attributed to these federal dollars decreased by 25.5%, from 19,195 in 2017 to 14,263 in 2018. This drop in the jobs impact suggests significant changes to the economic modeling used in the 2018 study when compared to this year’s paper. Yet, the researchers provide no explanation for this decline, or any changes in their methodology.
  • While not explaining the decline in the jobs outcomes compared to last year’s paper, the 2019 study also does not explain many other figures cited in the paper. For instance, the paper discusses—but does not include a specific dollar figure for—the federal dollars forfeited by individuals who switched from Exchange coverage to Medicaid expansion. Particularly given the errors in last year’s paper, the researchers had an obligation to “show their work,” and provide clear and transparent calculations explaining their conclusions. They did not do so.

The researchers also fail to note that, their study’s claims to the contrary, Louisiana has barely created any jobs since Medicaid expansion took effect. According to the Bureau of Labor Statistics, in June 2016, the month before expansion took effect, Louisiana had 1,979,100 jobs. According to the most recent federal data, Louisiana’s non-farm payrolls now stand at 1,981,000 jobs—a meager gain of 1,900 jobs in over three years. With Louisiana having over 10,000 more jobs one year before expansion took effect than it does today, the real-life data show that greater dependence on the federal government has not provided the economic boom that the study’s authors claim.

Rather than relying on an expansion of the welfare state to generate jobs—an agenda that has not worked, as the past three years have demonstrated—Louisiana should instead reform its Medicaid program as part of a broader agenda to create jobs and opportunity for the state. The people of Louisiana deserve real change in their lives, not flawed, taxpayer-funded studies attempting to defend the failed status quo.

This post was originally published by the Pelican Institute.

Debunking the Inaccurate Pro-Medicaid Report

Louisiana’s Medicaid expansion helped far too few people obtain good, affordable health coverage and actually cost Louisiana desperately needed jobs. But a taxpayer-funded report released by the Louisiana Department of Health on April 10 claims that the state’s Medicaid expansion – by opening the program to able-bodied adults – will generate billions of dollars in economic activity and thousands of jobs. The report’s flawed perspective cannot mask the state’s poor track record at growing the economy and jobs the past few years – an environment which current proposals for tax increases would only further undermine.

I. The Louisiana Department of Health’s report is factually inaccurate. The Louisiana Department of Health’s pro-Medicaid report discusses “net federal money” gained from the state’s Medicaid expansion, but in reality, it only looks at Medicaid-specific dollars. This perspective ignores the fact that people were dropping Obamacare Exchange coverage to enroll in the Medicaid expansion – and losing federal subsidy dollars in the process.

Over the past two years, subsidized enrollment on Louisiana’s health insurance Exchange has fallen nearly in half—from 170,806 in March 2016 to 93,865 earlier this year. The dramatic drop in enrollment illustrates that many individuals qualified for federal Exchange subsidies prior to expansion taking effect, and then switched to Medicaid.

The report’s discussion of “net new federal dollars” inaccurately ignores the substantial funding in federal Exchange subsidies that at least some expansion enrollees gave up by enrolling in Medicaid. In 2012, CBO noted that, for similarly situated low-income individuals, Exchange subsidies would average about $9,000 per year, but Medicaid coverage would cost $6,000. For those individuals who would have qualified for discounted Exchange policies, their Medicaid coverage may have actually cost Louisiana additional federal dollars – and jobs – because Medicaid could cost less than federal insurance subsidies.

Moreover, the Legislative Fiscal Office in 2015 assumed that approximately 20 percent of the enrollees in expansion would give up other private coverage to enroll in Medicaid. If Medicaid enrollees dropped employer-sponsored coverage to enroll in expansion, the supposedly “new” federal subsidy dollars would instead supplant existing coverage subsidies provided by the employer. The report does not acknowledge this trade-off.

II. Money doesn’t grow on trees – and tax hikes caused by Medicaid expansion actually cost Louisiana jobs. The report only examines federal spending on Medicaid, and not the tax increases used to finance that federal spending. Those tax increases cause job losses, but the report makes no attempt to count them. However, as others have noted, Christina Romer, one of former President Barack Obama’s chief economic advisers, believes that, on an economic impact basis, tax increases used to fund federal spending far outweigh that federal spending.

III. Medicaid creates a disincentive for work. The Congressional Budget Office concluded that Obamacare would, as a whole, reduce the workforce by the equivalent of 2.5 million jobs; Medicaid expansion provides some of the reason for that net job reduction. CBO analysts note that, because an extra dollar of income would cause individuals to lose Medicaid eligibility – subjecting them to sizable premiums and deductibles for Exchange coverage – expansion “effectively creates a tax on additional earnings” that “reduces the incentive to work.”

IV. Health care is not a jobs program. Those words come from none other than Zeke Emanuel, a former White House adviser who helped craft Obamacare. In a 2013 article in The New York Times, Emanuel noted that “the more we can control health care costs, the more Americans will prosper.” Other researchers from Harvard University have made the same point: “It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities.”

Taking the Governor’s report to its logical conclusion, to maximize the generous federal match rate for Medicaid expansion, Louisiana should, for instance, start paying doctors $5,000 for a simple office visit. That added Medicaid spending would create even more jobs and economic growth—as would a government program paying individuals to dig ditches and fill them in again. But, as the Harvard researchers note, neither approach would represent the most efficient use of taxpayer resources. And the report makes little attempt to argue that Medicaid expansion represents the best and most efficient source of economic activity.

V. Asking Washington for more funding isn’t a solution. The report argues for more reliance on federal dollars to support Louisiana, even though, according to the Pew Charitable Trusts, the state budget remains the most dependent on spending from Washington. As of 2015 – even before Medicaid expansion took effect in Louisiana – fully 42.2 percent of the state budget came from Washington. With the federal government facing a $21 trillion (and rising) debt, making Louisiana even more dependent on Washington’s largesse represents a recipe for fiscal ruin.

VI. If Medicaid is a job creator, why is Louisiana still down jobs year over year? If Medicaid expansion has created so many jobs, why has Louisiana lost a net of 200 jobs in the past year? According to the most recent Bureau of Labor Statistics data, the Louisiana workforce shrank from February 2017 to February 2018. With a shrinking workforce, the second-lowest economic growth rate in the country, and the largest decrease in incomes nationwide in 2016, if Louisiana receives any more “prosperity” from Medicaid expansion, the current malaise in the state could turn into a full-fledged economic crisis.

Conclusion

At a time when Louisiana faces its own “fiscal cliff,” the Department of Health should have better things to do with taxpayers’ hard-earned dollars than commission what amounts to a misleading propaganda campaign claiming that more government can grow Louisiana’s economy. Rather than spending time growing the public sector, policy-makers should instead focus on giving businesses the tools they need to create jobs in the private sector.

This post was originally published by the Pelican Institute.

House “Doc Fix” Bill Makes Things Worse, Medicare Analysis Finds

Proponents of the “doc fix” legislation the House passed before Congress’s Easter recess have argued that it would permanently solve the perennial issue of physician reimbursements in Medicare. But an analysis by Medicare’s nonpartisan actuary all but cautions: “Not so fast, my friends!

The estimate of the legislation’s long-term impacts by Medicare’s chief actuary is sober reading. The legislation provides for a bonus pool that physicians can qualify for over the next 10 years but applies only in 2019 to 2024. The budgetary “out-years” provide for minimal increases in reimbursement rates. Beginning in 2026, physicians would receive a 0.75 percent annual increase if they participate in some alternative payment models or a 0.25 percent annual increase if they do not. Both are significantly lower than the normal rate of inflation.

Such paltry increases could have daunting effects over time. “We anticipate that payment rates under [the House-passed bill] would be lower than scheduled under the current SGR [sustainable growth rate formula] by 2048 and would continue to worsen thereafter,” the report said. By the end of the 75-year projection, physician reimbursements under the House-passed bill would be 30% lower than under the SGR. Critics have called the current system unsustainable, but over time the House bill’s “fix” would result in something worse.

The actuary said that the inadequacies of the House-proposed payment increases “in years when levels of inflation are higher.” Under the House-passed bill, physicians would receive a 2.3% increase in reimbursements over a three-year period. According to the Bureau of Labor Statistics, the inflation rate was 11.3% in 1979, 13.5% in 1980, and 10.3% in 1981. If high inflation returned, doctors could effectively receive a pay cut after inflation.

While physician groups are clamoring to avoid the 21% cut that would take effect this month if some sort of “doc fix” is not enacted, the House’s “solution” could result in larger real-term cuts in future years. Medicare’s chief actuary explains the results of these reimbursement changes over time:

While [the House-passed bill] addresses the near-term concerns of the SGR system, the issues of inadequate physician payment rates are ultimately greater….[T]here would be reason to expect that access to physicians’ services for Medicare beneficiaries would be severely compromised, particularly considering that physicians are less dependent on Medicare revenue than are other providers, such as hospitals and skilled nursing facilities.

In sum, “we expect that access to, and quality of, physicians’ services would deteriorate over time for beneficiaries.”

The House “doc fix” legislation involved increasing the deficit by $141 billion, purportedly to solve the flaws in Medicare’s physician reimbursement system. But Medicare’s actuary thinks this legislation will make the long-term problem worse. When will Congress figure out that if you’re in a fiscal hole, it’s best to stop digging?

This post was originally published at the Wall Street Journal Think Tank blog.

We Told You So: Nation’s Largest Employer Scales Back Health Coverage

Over the weekend, more details emerged about how Obamacare is transforming the American workforce – and not for the better.  The New York Times reported on many small firms not hiring new workers, or scaling back hours for existing workers, to avoid the law’s new taxes.  And the Huffington Post reported that Wal-Mart has changed its employment policy, eliminating health insurance benefits for new part-time workers – thereby dumping them on to Obamacare’s exchanges:

Walmart, the nation’s largest private employer, plans to begin denying health insurance to newly hired employees who work fewer than 30 hours a week, according to a copy of the company’s policy obtained by The Huffington Post.  Under the policy, slated to take effect in January, Walmart also reserves the right to eliminate health care coverage for certain workers if their average workweek dips below 30 hours.…

Labor and health care experts portrayed Walmart’s decision to exclude workers from its medical plans as an attempt to limit costs while taking advantage of the national health care reform known as Obamacare….“Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan, which is one of the problems with the way the law is structured,” said Ken Jacobs, chairman of the Labor Research Center at the University of California, Berkeley.

“Walmart likely thought it didn’t need to offer this part-time coverage anymore with Obamacare,” said Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara.  “This is another example of a tremendous government subsidy to Walmart via its workers.”

In pursuing lower health care costs, Walmart is following the same course as many other large employers. But given its unrivaled scale, Walmart’s policies tend to influence American working conditions more broadly.  Tom Billet, a senior consultant at Towers Watson, a professional services firm that works with large companies to develop benefit plans, said other companies are also crafting policies that will exclude some part-time workers from medical coverage.  Billet portrayed the growing corporate interest in separating out part-time workers as a reaction to another aspect of Obamacare – the new rules that require companies with at least 50 full-time workers to offer health coverage to all employees who work 30 or more hours a week or pay penalties.

One major bottom-line question in this development relates to how many more people will be added to government health rolls by this apparent trend.  In last month’s job data, the Bureau of Labor Statistics estimated nearly 28 million Americans work part-time – defined by the BLS as fewer than 35 hours per week.  Using Obamacare’s less stringent 30 hours per week standard would reduce that 28 million number somewhat – and many part-time workers do not have access to employer-provided health insurance currently.  (Of firms offering insurance to their employees, 28% extend that offer to part-time workers as well – a fact which only indirectly illuminates the number of part-time workers receiving insurance coverage from their employer.)

All that said, the point remains that millions – and perhaps tens of millions – of part-time workers who currently receive insurance from their employers could lose it due to Obamacare – and federal taxpayers will be stuck paying the bill.  That’s not “reform,” and it’s not a change millions of American workers, to say nothing of American taxpayers, can believe in.

Updated JEC Member Viewpoint: Sen. Jim DeMint on the $840 Billion Price Tag of Obama’s Broken Promise on Premiums

This Member Viewpoint by Sen. Jim DeMint was originally published by the Joint Economic Committee.

A $12,791 Difference for the Average Family, $4,318 for the Average Individual

When campaigning for the presidency, then-candidate Barack Obama repeatedly promised that under his health care reform proposal, health insurance premiums would go down by $2,500 by the end of his first term.1 The end of President Obama’s first term is now approaching, and the change in average family premiums is surprisingly close to candidate Obama’s promise: the problem is, that change is in the wrong direction. Instead of falling $2,500, the average employer-sponsored family premium has increased $3,065.2

The difference, then, between candidate Obama’s promise and President Obama’s record is $5,565.3 But that is just the difference for 2012. If the promised $2,500 decline is allocated proportionally over four years and across different plan types, the cumulative gap between actual and promised premiums for private employer based health insurance equals $12,832 for the average family and $4,331 for the average individual (excluding any rebates).4

Of course, to be fair, the Medical Loss Ratio (MLR) provision of Obamacare will result in some health insurance enrollees receiving rebate checks from their insurance providers. This provision is Obamacare’s attempt at driving down insurance costs by dictating how insurance companies can spend money freely given to them by employers and individuals who wish to purchase their services. For the 2011 plan year, an estimated $1.3 billion in rebate checks will be sent to about 16 million enrollees, for an average rebate amount of $85.5 Assuming a similar level of rebates go out in 2013 for the 2012 plan year, the MLR rebates reduce the gap between promised premiums and actual premiums by only three-tenths of one percent, to a cumulative difference of $12,791 for the average family and $4,318 for the average individual. That is $12,791 less money that was spent (on something other than health insurance), saved, or invested by the average family and $4,318 less by the average individual.

When you add up all the extra money – beyond the level promised by candidate Obama – Americans have spent on health insurance over the past four years, the economy-wide impact is an astounding $840 billion.6 That’s as much as the President’s failed stimulus package, and not so far off from the initially reported $940 billion ten-year cost of Obamacare (the updated ten-year cost is $1.76 trillion, not including the costs of implementation).7 What’s worse though is that this figure will only rise over time as Obamacare’s many taxes and regulations continue to drive up the cost of health insurance.
In terms of full-time jobs, the $840 billion difference is equivalent to the cost of private-sector employers supporting an average of 3.2 million jobs each year between 2009 and 2012, and a total of 5.2 million jobs in 2012 alone.8

With more than $840 billion less in Americans’ pockets than Obama promised, it’s no wonder our economy continues to struggle. It is the government-knows-best view of the Obama Administration and Democrats in Congress that has contributed to the American economy stalling out. His promise to reduce premiums by $2,500 and his administration’s estimate that the stimulus would cut the unemployment rate to 5.6% (by August 2012) show President Obama’s conviction that government is the solution to driving down costs and creating jobs.9 Unfortunately, that conviction has proven unfounded. Excessive government spending and intervention have not driven down health insurance premiums by $2,500, but rather contributed to a $3,065 increase. And unprecedented deficit-financed stimulus spending has not brought the unemployment rate down to 5.6%, but rather kept it up above 8% with employers and investors holding back as Obamacare and other regulations have increased their costs and as unsustainable deficit spending has given rise to fear over coming tax hikes.

 

Analytical Appendix

Population and Insurance Coverage

The Census Bureau publishes data on the number of people in the United States with health insurance coverage. These data are broken down into private insurance coverage and government insurance coverage. Within private coverage, the data are segmented into individuals with employment based health insurance and direct purchase health insurance. The data from the Census Bureau are available through 2011. Data for 2012 are estimated based on the average annual percentage increase in each category of insurance from 1995-2011.
For allocation of insured individuals between individual or self-only plans and family plans, data were taken from the 2011 Medical Expenditure Panel Survey (MEPS). These data show that individual or self-only plans made up 50.2% of all private sector employer health plans while family plans comprised the remaining 49.8%. This breakdown was also applied to the direct purchase market and across all years. The resulting allocation of individuals across private plan types is shown below.

For each family plan, there are assumed to be 3.05 members. This statistic is based on a breakdown of direct purchase family policies by size from ehealthinsurance.com, and it assumes an average of eight members per plan within the category of 6+ members.

Premium Costs

Data on average annual premium costs for employment based health insurance come from the Kaiser Family Foundation Annual Employer Health Benefits Survey. Data on premium costs for direct purchase health insurance come from the ehealthinsurance.com Annual Cost and Benefit Reports. As of this updated publication, the data on direct purchase plans from ehealthinsurance.com were only available through 2011. The analysis conservatively assumes no rise in direct purchase premiums from 2011 to 2012.

Promised Reductions

The promise of a $2,500 reduction in the average family premium by the end of President Obama’s first term is applied as a $625 per year reduction in costs for the average family premium (-$625 in 2009, -$1,250 in 2010, -$1,875 in 2011, and $-2,500 in 2012). The applicable promised reduction for the average individual or self only premium is $927 for employer based health insurance and $1,077 for direct purchase health insurance. These individual premium promised reduction amounts are based on the ratio of individual to family premium costs in 2008, when the promise was made. At that time, the average employment based individual premium was equal to 37.1% of the average family premium (.371*-$2,500 = -$927) while the average direct purchase individual premium was 43.1% of the average direct purchase family premium (.431*-$2,500 = -$1,077).

Aggregate Estimates of the Broken Promise

For aggregate estimates of amounts paid for health insurance vs. those promised, the number of people in each insured group (individual employment based, individual direct purchase, family employment based, and family direct purchase) was multiplied by the difference between the promised premium cost and the actual premium cost in each year from 2009 to 2012. The sum of additional premium costs across these privately-insured individuals and families from 2009 to 2012 amounts to $843 billion ($843,135,995,165). The new Medical Loss Ratio (MLR) component of the Affordable Care Act is estimated to result in roughly $1.3 billion ($1,343,496,719) in rebates to be paid by insurers to enrollees (beginning in August 2012) for the 2011 plan year. In keeping with the conservative estimate that direct purchase premiums did not rise from 2011 to 2012, MLR rebates in 2013 (for the 2012 plan year) are also assumed to hold steady at $1.3 billion. Excluding the $2.6 billion of cost-reducing MLR rebates, the total gap between promised and actual premium costs equals $840 billion ($840,449,001,727).

Jobs Equivalent Cost Estimates

Estimates translating the annual cost differences between promised and actual premiums into the cost of private-sector job creation were obtained by dividing the total economy-wide cost difference for each year by the average employee compensation for full-time, private-sector employees in that year. Compensation data come from the Bureau of Labor Statistics Employer Costs for Employee Compensation Survey (data were available through the second quarter of 2012). The table below shows the annual jobs equivalent costs estimates.

 

Endnotes

1 Freedom Eden, “Obama: 20 Promises for $2,500,” March 22, 2010, http://freedomeden.blogspot.com/2010/03/obama-20-promises-for-2500.html.
2 Kaiser Family Foundation, Annual Employer Health Benefits Surveys 2008-2011, http://www.kff.org/insurance/index.cfm.
3 Data on 2012 premiums costs for direct purchase premiums were not yet available. This analysis relies on a conservative estimate that direct purchase premiums will not rise in 2012, but will remain constant at their 2011 level.
4 Data on private, direct purchase health insurance premiums for 2008-2011 come from ehealthinsurance.com. See Analytical Appendix for a detailed analysis of estimates.
5 Kaiser Family Foundation, “Insurer Rebates under the Medical Loss Ratio: 2012 Estimates,” April 2012, http://www.kff.org/healthreform/upload/8305.pdf
6 See Analytical Appendix.
7 Congressional Budget Office, “Estimate of direct spending and revenue effects for the amendment in the nature of a substitute released on March 18, 2010,” http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4872_0.pdf, and “Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act,” March 13, 2012, http://cbo.gov/publication/43076.
8 Estimates based on data from the Bureau of Labor Statistics Employer Costs for Employee Compensation Survey (quarterly data through the 2nd quarter of 2012) and private-sector, full-time employee compensation. In the first two quarters of 2012, the average cost of employee compensation was $67,020.
9 Unemployment estimate comes from: Christina Romer and Jared Bernstein, “The Job Impact of the American Recovery and Reinvestment Plan,” January 9, 2009, http://www.politico.com/pdf/PPM116_obamadoc.pdf.

JEC Member Viewpoint: Sen. Jim DeMint on the $805 Billion Price Tag of Obama’s Broken Promise on Premiums

This Member Viewpoint by Sen. Jim DeMint was originally published by the Joint Economic Committee.

 

When campaigning for the presidency, then-candidate Barack Obama repeatedly promised that under his health care reform proposal, health insurance premiums would go down by $2,500 by the end of his first term.1 The end of President Obama’s first term is now approaching, and the change in average family premiums is surprisingly close to candidate Obama’s promise: the problem is, that change is in the wrong direction. Instead of falling $2,500, the average employer-sponsored family premium has increased $2,393.2

The difference, then, between candidate Obama’s promise and President Obama’s record is $4,893.3 But that is just the difference for 2012. If the promised $2,500 decline is allocated proportionally over four years and across different plan types, the cumulative gap between actual and promised premiums for private health insurance equals $12,271 for the average family and $4,177 for the average individual.4

Of course, to be fair, the Medical Loss Ratio (MLR) provision of Obamacare will result in some health insurance enrollees receiving rebate checks from their insurance providers. This provision is Obamacare’s attempt at driving down insurance costs by dictating how insurance companies can spend money freely given to them by employers and individuals who wish to purchase their services. For the 2011 plan year, an estimated $1.3 billion in rebate checks will be sent to about 16 million enrollees, for an average rebate amount of $85.5 Assuming a similar level of rebates go out in 2013 for the 2012 plan year, the MLR rebates reduce the gap between promised premiums and actual premiums by less three-tenths of one percent, to a cumulative difference of $12,230 for the average family and $4,163 for the average individual. That is $12,230 less money that was spent (on something other than health insurance), saved, or invested by the average family and $4,163 less by the average individual.

When you add up all the extra money – beyond the level promised by candidate Obama – Americans have spent on health insurance over the past four years, the economy-wide impact is an astounding $805 billion.6 That’s as much as the President’s failed stimulus package, and not so far off from the initially reported $940 billion ten-year cost of Obamacare (the updated ten-year cost is $1.76 trillion, not including the costs of implementation).7 What’s worse though is that this figure will only rise over time as Obamacare’s many taxes and regulations continue to drive up the cost of health insurance.

In terms of full-time jobs, the $805 billion difference is equivalent to the cost of private-sector employers supporting an average of 3 million jobs each year between 2009 and 2012, and a total of 4.7 million jobs in 2012 alone.8

With more than $800 billion less in Americans’ pockets than Obama promised, it’s no wonder our economy continues to struggle. It is the government-knows-best view of the Obama Administration and Democrats in Congress that has contributed to the American economy stalling out. His promise to reduce premiums by $2,500 and his administration’s estimate that the stimulus would cut the unemployment rate to 5.7% (by July 2012) show President Obama’s conviction that government is the solution to driving down costs and creating jobs.9 Unfortunately, that conviction has proven unfounded. Excessive government spending and intervention have not driven down health insurance premiums by $2,500, but rather contributed to a $2,393 increase. And unprecedented deficit-financed stimulus spending has not brought the unemployment rate down to 5.7%, but rather kept it up at 8.2% with employers and investors holding back as Obamacare and other regulations have increased their costs and as unsustainable deficit spending has given rise to fear over coming tax hikes.

Analytical Appendix

Population and Insurance Coverage

The Census Bureau publishes data on the number of people in the United States with health insurance coverage. This data is broken down into private insurance coverage and government insurance coverage. Within private coverage, the data is segmented into individuals with employment based health insurance and direct purchase health insurance. The data from the Census Bureau goes through 2010. Data for 2011 and beyond is estimated based on the average annual percentage increase in each category of insurance from 1995-2010.
For allocation of insured individuals between individual or self-only plans and family plans, data was taken from the 2011 Medical Expenditure Panel Survey (MEPS). This data shows that individual or self-only plans made up 50.2% of all private sector employer health plans while family plans comprised the remaining 49.8%. This breakdown was also applied to the direct purchase market and across all years. The resulting allocation of individuals across private plan types is shown below.

For each family plan, there are assumed to be 3.05 members. This statistic is based on a breakdown of direct purchase family policies by size from ehealthinsurance.com, and it assumes an average of eight members per plan within the category of 6+ members.

Premium Costs

Data on average annual premium costs for employment based health insurance come from the Kaiser Family Foundation Annual Employer Health Benefits Survey. Data on premium costs for direct purchase health insurance come from the ehealthinsurance.com Annual Cost and Benefit Reports. As of publication, the data from both of these sources was only available through 2011. The analysis conservatively assumes no rise in premiums from 2011 to 2012.

Promised Reductions

The promise of a $2,500 reduction in the average family premium by the end of President Obama’s first term is applied as a $625 per year reduction in costs for the average family premium (-$625 in 2009, -$1,250 in 2010, -$1,875 in 2011, and $-2,500 in 2012). The applicable promised reduction for the average individual or self only premium is $927 for employer based health insurance and $1,077 for direct purchase health insurance. These individual premium promised reduction amounts are based on the ratio of individual to family premium costs in 2008, when the promise was made. At that time, the average employment based individual premium was equal to 37.1% of the average family premium (.371*-$2,500 = -$927) while the average direct purchase individual premium was 43.1% of the average direct purchase family premium (.431*-$2,500 = -$1,077).

Aggregate Estimates of the Broken Promise

For aggregate estimates of amounts paid for health insurance vs. those promised, the number of people in each insured group (individual employment based, individual direct purchase, family employment based, and family direct purchase) was multiplied by the difference between the promised premium cost and the actual premium cost in each year from 2009 to 2012. The sum of additional premium costs across these privately-insured individuals and families from 2009 to 2012 amounts to $807 billion ($807,326,158,132). The new Medical Loss Ratio (MLR) component of the Affordable Care Act is estimated to result in roughly $1.3 billion ($1,343,496,719) in rebates to be paid by insurers to enrollees (beginning in August 2012) for the 2011 plan year. In keeping with the conservative estimate that premium costs did not rise from 2011 to 2012, MLR rebates in 2013 (for the 2012 plan year) are also assumed to hold steady at $1.3 billion. Excluding the $2.6 billion of cost-reducing MLR rebates, the total gap between promised and actual premium costs equals $805 billion ($804,639,164,694).

Jobs Equivalent Cost Estimates

Estimates translating the annual cost differences between promised and actual premiums into the cost of private-sector job creation were obtained by dividing the total economy-wide cost difference for each year by the average employee compensation for full-time, private-sector employees in that year. Compensation data comes from the Bureau of Labor Statistics Employer Costs for Employee Compensation Survey (data for 2012 was available only through the first quarter). The table below shows the annual jobs equivalent costs estimates.

 

Endnotes

1 Freedom Eden, “Obama: 20 Promises for $2,500,” March 22, 2010, http://freedomeden.blogspot.com/2010/03/obama-20-promises-for-2500.html.
2 Kaiser Family Foundation, Annual Employer Health Benefits Surveys 2008-2011, http://www.kff.org/insurance/index.cfm.
3 Data on 2012 premiums costs for both employer based and direct purchase premiums were not yet available. This analysis relies on a conservative estimate that premiums will not rise in 2012, but will remain constant at their 2011 level.
4 Data on private, direct purchase health insurance premiums for 2008-2011 comes from ehealthinsurance.com. See Analytical Appendix for a detailed analysis of estimates.
5 Kaiser Family Foundation, “Insurer Rebates under the Medical Loss Ratio: 2012 Estimates,” April 2012, http://www.kff.org/healthreform/upload/8305.pdf
6 See Analytical Appendix.
7 Congressional Budget Office, “Estimate of direct spending and revenue effects for the amendment in the nature of a substitute released on March 18, 2010,” http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4872_0.pdf and “Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act,” March 13, 2012, http://cbo.gov/publication/43076.
8 Estimates based on data from the Bureau of Labor Statistics Employer Costs for Employee Compensation Survey (quarterly data through the 1st quarter of 2012) and private-sector, full-time employee compensation. In the 1st quarter of 2012, the average cost of employee compensation was $66,960.
9 Unemployment estimate comes from: Christina Romer and Jared Bernstein, “The Job Impact of the American Recovery and Reinvestment Plan,” January 9, 2009, http://www.politico.com/pdf/PPM116_obamadoc.pdf.

 

Rhetoric vs. Reality: Health Care “Reform” and Jobs

CLAIM:  “So this bill is not only about the health security of America.  It’s about jobs.  In its life it will create 4 million jobs — 400,000 jobs almost immediately.”

— Speaker Pelosi at the White House health summit

FACT:  According to this morning’s release from the Bureau of Labor Statistics, the unemployment rate once again did not decline, remaining at 9.1 percent.  And discounting the 45,000 jobs “created” by striking Verizon workers returning back to work, the economy really only created fewer than 60,000 jobs in September – even though the economy needs about 150,000 new jobs per month just to keep up with the growth in the labor force.

A Preview of Tomorrow’s Census Report on the Uninsured

Tomorrow at 10 AM, the Census Bureau will be releasing its annual update on income, poverty, and health insurance coverage for 2010.  Several things to keep in mind ahead of the report’s release:

New Methodology:  Tomorrow’s Census figures on the uninsured will be released using a new method for imputing health coverage to individuals that do not respond to the health insurance survey question.  Liberal groups are claiming this revision will somewhat increase the number of Americans with health insurance, which would tend to reduce the number of reported uninsured.  Past year’s uninsured data will be revised in tomorrow’s report to reflect the new methodological format.  This is not the first time the Census methodology has been revised; many economists and statistical experts have questioned its accuracy of its uninsured estimates.  (See more at the bottom of this e-mail.)

Failed “Stimulus” Means Millions More Uninsured:  One of the prime reasons the number of uninsured is expected to increase again this year (methodological changes notwithstanding) is that the Obama Administration’s “stimulus” failed to bring down unemployment to promised levels.  Because most Americans obtain health coverage through employment, millions more Americans would be insured if the unemployment rate were at the 6.4% level the White House promised it would be today once the “stimulus” passed, rather than the 9.1% it actually stands at.

5,110,000:  Remember Democrats’ repeated claims that “every day, 14,000 Americans lose their coverage?”  The number was invoked frequently during the health care debate, and President Obama even cited the statistic in his September 2009 speech to Congress.  The statistic hasn’t been repeated often since the law passed, probably because its major coverage expansions don’t take effect until 2014.  But if the Democrat claims were true, and 14,000 Americans lost their health insurance every day, the Census report will show the number of uninsured Americans rose by 5.1 million in 2010.  However, the dubious assumptions behind the statistic make it likely that any potential increase in the number of uninsured won’t match the earlier predictions.  (The short version of the story: The Center for American Progress came up with the 14,000 estimate at a time when the economy was shedding more than 500,000 jobs monthly, which is not the case now.)

Uninsured Number vs. Rate:  While press accounts of the Census report tend to focus on the number of uninsured Americans, the uninsured rate has remained relatively constant for most of the past two decades (last year being an exception).  Economists tend to emphasize the unemployment rate – and not the total number of unemployed workers – as the most accurate picture of economic health, as the former reduces the impact of population growth.  For instance, while there are currently over 2 million more workers unemployed than there were during the 1982-83 recession, the unemployment rate is (slightly) below levels reached during that downturn, because the American workforce has grown by more than 40 million workers over the past three decades.  Some may therefore argue that the uninsured rate, as opposed to the number of uninsured overall, may present a more accurate picture of the health insurance system.

Uninsured Rate vs. Unemployment Rate:  The Bureau of Labor Statistics’ August employment report found a total unemployment rate – including discouraged workers who have left the workforce and part-time workers who cannot find full-time employment – of 16.2 percent.  It is likely that, for the third straight year, the percentage of individuals seeking full-time work who cannot find it will approach or exceed the percentage of individuals without health coverage – a pattern not previously seen for at least two decades.  This dynamic may cause many to question the logic of Obamacare’s more than $800 billion in tax increases at a time of record unemployment.

Cohorts of the Uninsured:  Former National Economic Council Director Keith Hennessey has analyzed the various groups within the uninsured population to ascertain who might need assistance to purchase health coverage.  The numbers are now dated (based on 2007 Census data), but it’s the best explanation out there of groups of the uninsured – those who are enrolled in Medicaid and/or SCHIP but aren’t reported on the Census survey as such, those who are eligible for Medicaid but haven’t enrolled, non-citizens, individuals who could likely afford to buy some form of health insurance, and the “young invincibles.”

More on Survey Methodology:  While the Census Bureau figure of uninsured Americans is among the most widely reported, it is far from the only measure used – or the most accurate.  Many indicators confirm that the Census survey represents a “point-in-time” snapshot of the uninsured population at any given moment, and does not reflect the number of individuals without insurance for long periods of time – those in most need of assistance.  For instance, while last year’s Census report found 50.7 million uninsured in 2009, a separate study by the Centers for Disease Control found that 32.8 million Americans were uninsured for one year or longer in 2009, and a survey of health spending conducted by the Department of Health and Human Services found 41.3 million non-elderly Americans lacked coverage for all of 2009.  In 2009, the Census survey saw a larger jump in the number of uninsured than the other two reports, which could be a result of methodological flaws, and/or the fact that many of the uninsured lacked health coverage for periods of less than a year. (For a further discussion of these issues, see also a 2006 Kaiser Family Foundation brief comparing the uninsured surveys, as well as a 2003 CBO analysis of the long-term uninsured.)

It is also worth noting that the Census survey relies on individuals to self-report their insurance status, and some individuals may not remember periods of health insurance coverage.  Adding a “residual” question to the Census survey in 2000 – to confirm that those without employer, individual, or government coverage were in fact uninsured – reduced the number of uninsured Americans by 8 percent.  One survey conducted for the Department of Health and Human Services in 2005 adjusted for the number of individuals which the Centers for Medicare and Medicaid Services (CMS) reported were enrolled in Medicaid, but who did not report insurance coverage for the Census survey.  Such adjustments for the Medicaid undercount reduced the number of uninsured by about 9 million – or one-fifth of the total uninsured – and the number of uninsured children by half.  For these reasons, the Census Bureau report itself admits that “health insurance coverage is underreported [in the Census data] for a variety of reasons,” meaning that by Census’ own admission, the number of uninsured is lower than its report indicates.

Rhetoric vs. Reality: Health Care “Reform” and Jobs

CLAIM:  “So this bill is not only about the health security of America.  It’s about jobs.  In its life it will create 4 million jobs — 400,000 jobs almost immediately.”

— Speaker Pelosi at the White House health summit

FACT:  According to this morning’s release from the Bureau of Labor Statistics, the economy generated ZERO JOBS during August – even though the economy needs about 150,000 new jobs per month just to keep up with the growth in the labor force.  Job growth for the past two months (i.e., June and July) was also revised downward by 58,000 jobs.

FACT:  The alternative economic scenario released by the Administration yesterday in its mid-session review – which reflects the most recent economic data and developments – projects that unemployment will average 9 percent in 2012 – even though the Administration promised in 2009 that unemployment would not rise below 8 percent if the “stimulus” bill passed.

Rhetoric vs. Reality: Health Care “Reform” and Jobs

CLAIM:  “So this bill is not only about the health security of America.  It’s about jobs.  In its life it will create 4 million jobs — 400,000 jobs almost immediately.”

— Speaker Pelosi at the White House health summit

FACT:  According to this morning’s release from the Bureau of Labor Statistics, the economy generated only 118,000 jobs during July – still below the 150,000 new jobs per month that most experts agree are needed just to keep up with the growth in the labor force.

FACT:  Former Obama Administration adviser Larry Summers, writing in an op-ed in the Washington Post earlier this week, acknowledged that “it would be surprising if growth were rapid enough to reduce unemployment even to 8.5 percent by the end of 2012” – even though the Administration promised in 2009 that unemployment would not rise below 8 percent if the “stimulus” bill passed.