How Much Will You Pay for Health Care? You'll Pay Plenty

Carrie Lukas
Posted: Dec 08, 2009 6:03 PM
How Much Will You Pay for Health Care? You'll Pay Plenty

Just how much can the average American family expect to pay for health insurance if the proposals currently making their way through Congress become law? It's a difficult question to answer, in part because how much you'll pay will depend on many variables.

President Obama promised that "you’ll save money" as a result of this bill. That's going to be a hard promise to keep. Most estimates suggest that the proposed legislation is much more likely to push costs up, not down, for most Americans.

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Take the recent analysis from the Congressional Budget Office (CBO). Cheerleaders for the legislation (in this example, The New York Times) claimed that the CBO found “there would be no major increase in premiums for the overwhelming majority of Americans who already have insurance.” Yet the actual report is less reassuring. The CBO estimated that by 2016, the average premium for those in the individual market (around one in six of those insured) could expect an average premium 10 to 13 percent higher than under current law. For those with family coverage, that could mean an extra $2,100 per year. People in the small and large group markets were projected to experience essentially no change in their premium costs. That's relatively comforting, but doesn't exactly meet the President's threshold of “saving” you money.

The CBO also explains that this data is for the “average” person. Actually, price changes would vary based on personal circumstances: as the report states, “other provisions would tend to increase the premiums paid by healthier enrollees relative to those paid by less healthy enrollees or would tend to increase premiums paid by younger enrollees relative to those paid by older enrollees.” Indeed, those who are younger and healthier can expect big increases in how much they pay. One analysis estimated that premiums for the younger generation could increase “by as much as 40% more than the average rate change.”

Some analysts suggest that CBO may be unduly optimistic, arguing that CBO may be under-estimating the number of young people who will opt to have no insurance (in spite of the individual mandate), preferring to pay the penalty rather than overpriced premiums. Other researchers estimate that individuals could end up paying thousands of dollars more in premiums.

The analysis is pretty technical, and the exact numbers depend on many different assumptions. But common sense should answer the question—how much will you be paying?—for most Americans: more!

The scope of government interference in the insurance market is about to expand dramatically. Bureaucrats will dictate what insurance packages must contain, which is akin to someone accompanying you while grocery shopping, saying “sorry, you have to get—and pay for—all these vegetables you don't really want.” Insurance companies will be prohibited from taking relevant factors (like age, health condition, and gender) fully into account when pricing policies. That means that some (particularly older consumers and those with pre-existing conditions) will pay less for insurance, but it also means most people are going to pay more in the form of higher premiums.

As if acknowledging that costs will rise, the government will offer subsidies to some families (based on income) to lessen the blow of higher premiums. Yet premiums are only one way that families will pay more for this health care bill. The legislation is expected to cost about a trillion dollars over ten years. The media echoes the claim that the legislation is “paid for” and won't add to the debt. Let's be clear about what that means: the government will “pay for” this new entitlement by slashing about $400 billion from Medicare and raising taxes to cover the rest. In other words, the costs of the bill will be paid for by seniors, who will receive fewer services, and by the rest of us through higher taxes.

The higher taxes may not hit every family directly, but they’ll still end up footing much of the bill. The Senate plans to tax health insurers, medical device manufactures, and drug companies—and much of the cost of those taxes will be passed down to consumers. High income earners will be hit with an additional tax, which will affect many small business owners and therefore their employees and customers. Other employers will face penalties for not offering sufficient health insurance. That will raise the cost of employment, which is bad news for the legions of unemployed and those who fear joining their ranks.

Analysts will quibble about exactly how much this legislation will cost. That's an important process. But let's not lose sight of the big picture: this is a mammoth piece of legislation that will cost the American people a huge amount of money – and liberty.