7-28-09, 12:44 pm

If nothing is done about health reform, as Republicans have indicated is their top priority in order to 'break' President Obama, a typical family can expect to pay about 71 percent more for health insurance premiums within the next 10 years, says a new memo from the Center for American Progress Action Fund (CAPAF). According to the memo, the average family premium will total more than $22,000, if no health reform is enacted this year.

This figure does not include out-of-pocket expenses for medical care such as co-payments and deductibles, which could bump up a typical family's annual health care costs to more than $25,000, the report finds.

Families in states like Indiana, Michigan, Oregon, Massachusetts, Texas and California can expect even higher costs, according to the CAPAF memo.

These alarming facts will create two basic realities for millions of working families: they will see a steady decline in their take home pay, and the numbers of people pushed out of the health insurance system will grow.

Employers will struggle to help their employees cover these costs. Some will simply shift more of the costs of health benefits plans to workers, while others will gradually reduce the quality of the coverage they provide.

The impact of higher costs have already hit small employers hard, says a new study by the White House Council of Economic Advisers. Less than one-half of small employers with fewer than 10 employees can afford to provide any coverage for the employees. About 13 million uninsured people work in small businesses.

Health reform bills working their way through Congress now will help families avoid these exorbitant costs: by making new investments in health care research, constructing health information technology, eliminating discrimination against people with preexisting conditions, mandating portability and choice of doctors, and creating an insurance exchange that provides a choice of insurance plans, including a public insurance program.

According to White House Council of Economic Advisers Chair Christina Romer, a public insurance program may be the key to the whole reform package. It will make sure that within the insurance exchange, individuals, families and businesses will have a choice of plans.

For the exchange to be viable, on the one hand, Romers says, it needs plenty of people and small businesses pooled together. On the other, there need to be enough insurance providers participating as well, and that would be the main role of the public insurance program, she states. 'One of the things that the President has talked about when he talks about why a public plan is important was to make sure that there is always an option, that there is plenty of competition between providers.'

These reforms will improve the quality of health care, including for wellness and prevention and increase the pool of insured people. The long-term benefit will be to reduce the cost of health care for families and businesses. But as Josh Bivens, an economist at the Economic Policy Institute, points out, a public program is needed not just as a practical measure to make the insurance exchange work. It is needed because the greater the federal role in the delivery of health care the more restraint there will be on long-term costs.

For example, since 1970 the cost per person of private insurance has far out-paced the cost of Medicare, even as the cost to the federal government for Medicare has grown. As Bivens argues, 'it is possible to increase federal costs while still economizing overall.'

Simply put, when the Congressional Budget Office (CBO) reported that one early version of a health reform plan in Congress would add to the deficit, it did so only by ignoring the long-term benefit reform will have on the overall cost of care. According to Bivens, the CBO 'did not note the very large system-wide savings through a large federal role in financing coverage.'

Bivens cites a report by the Lewin Group, which is a private think-tank that scores the fiscal impact of bills being considered in Congress. According to that report, a health reform package with a mixture of private and public reforms, including a public insurance program, adds to federal costs but it also restrains the growth of costs far below the rates we can expect to see over the next 10 years without reform.

Incidentally, the Lewin Group report, Bivens points out, also scores a Republican proposal to tax employment health benefits far worse. While the Republican health tax wouldn't add as much to federal costs as the kind of plan offered by the President, the federal expenditures in the GOP tax proposal would grow by at least $50 billion and add about four times in costs to Americans for health care as the a plan similar to the President's – in the first year alone. Little control over long-term costs would be realized.

Bivens does not take into account revenue-raising measures included in congressional plans or supported by the President that would create a 'deficit neutral' program. The President favors elimination of federal overpayments to privatized Medicare Advantage programs, a fix of the reimbursement formulas for Medicare and Medicaid, an employer mandate, revisions of the tax code that return tax laws for the highest one percent of Americans to those under Reagan, and the formation of a Medicare advisory council that can recommend regular tweaks to the Medicare system to control costs. According to White House Budget Czar Peter Orszag, savings produced by these reforms can cover the costs of the overall program.

Doing nothing, however, means people will lose coverage or pay 71 percent more for it in 10 years, and the 50 million without coverage can expect no change. The additional tens of millions who go without coverage at some point during a given year or who report having inadequate coverage can expect things to get worse. If the Republican health tax plan were passed, we can expect no foreseeable control of costs and new federal costs. Under the President's plan, with a public option, we would see a deficit neutral plan, that expands affordability, accessibility and quality. Most importantly, we can avoid the alarming future that doing nothing will create.