A Project of The Annenberg Public Policy Center

Obama’s Exaggerated Health Care Claims


President Obama made some exaggerated claims during a recent speech in Cleveland about the Affordable Care Act and the House Republican proposal for Medicare.

The president said his health care law is “reducing the overall costs — $1,800 in people’s pockets.” The $1,800 is not a reduction in insurance premiums, but rather the difference between the cost of the average employer-sponsored plan in 2014 and what the average premium would have been if based on average rate increases from 2000 through 2010. The calculations were done by White House economic advisers, but even they say the Affordable Care Act isn’t responsible for the full $1,800 difference.

Obama also said the GOP budget would “gut the guarantee at the center of Medicare by turning it into a voucher program.” The House plan makes significant changes, but it keeps traditional Medicare as an option. Congressional experts say a plan like this one would reduce premiums by 6 percent on average in 2020, but the cost of premiums would vary depending on where seniors live and what plan they choose.

Putting ‘$1,800 in People’s Pockets’?

Obama gave a speech March 18 at the City Club of Cleveland that focused on what he called “middle-class economics.” In talking about the economic impact of the Affordable Care Act, the president said the law doesn’t get credit for reducing health care costs.

Obama, March 18: If premiums had kept on growing over the last four years at the rate they had in the previous decade, the average family premium would be $1,800 higher than it is today. Now, we don’t get a lot of credit for that. But keep in mind that some of the reforms that we’re putting in place are not only giving more people insurance, but we’re actually reducing the overall costs — $1,800 in people’s pockets. They don’t notice it because it’s what didn’t happen.

When we asked the White House where the president got the $1,800 figure, we were given a copy of a September 2014 report by the White House Council of Economic Advisers. That report is based on the Kaiser Family Foundation’s annual surveys of employer-sponsored health care plans. The 2014 report found that the average family premium was $16,834 — 3 percent more than it was in 2013.

White House Council of Economic Advisers, Sept. 24, 2014: In 2014, employer premiums grew at the slowest rate since the KFF/HRET survey began in 1999. If premiums growth had matched its 2000-2010 average since 2010, the average premium would be $1,800 higher today. Lower premiums make it easier for employers to add jobs today and ultimately translate into bigger paychecks for workers.

First, as we have written, the growth of the cost of employer-sponsored health insurance premiums has slowed in recent years, but experts attribute it largely to the sluggish economy and only partly to the ACA. Not even the Council of Economic Advisers credited the Affordable Care Act with the full $1,800 difference. Its report said, “A significant fraction of the recent slowdown in health care price inflation can be linked to Medicare reforms in the Affordable Care Act.” The report did not say how much of the $1,800 was attributable to the Affordable Care Act, and the White House did not provide us with any more information.

Second, the $1,800 difference is the amount that would have been paid by employers and employees, so not all of the $1,800 would wind up directly in employees’ pockets.

The White House told us that the president did not say, or at least did not mean to say, that the law was responsible for putting the entire “$1,800 in people’s pockets.” But that’s certainly the impression he gave.

Gutting the Medicare Guarantee?

The president also contrasted the impact of his policies on the middle class with the proposals in the fiscal 2016 budget resolution that was released a day earlier by the Republican-controlled House Budget Committee. In particular, he criticized the budget for proposing changes to Medicare — the health care program for seniors.

Obama, March 18: They would try once again to gut the guarantee at the center of Medicare by turning it into a voucher program. Instead of the promise that health care will be there for you when you need it, you get a roll of the dice. If you get sick and that voucher is enough to cover the costs of your care then you win. But if not, you lose.

The House GOP plan doesn’t “gut” the guarantee of Medicare, but it makes significant changes to the program. The impact on premiums would vary depending on where seniors live and what plan options they choose.

The plan would make no changes for those currently on Medicare and those over age 55 who will be on Medicare in the near future. Future beneficiaries (those currently 55 and under) would receive a government subsidy to purchase insurance on a newly created Medicare exchange once they are eligible for Medicare. The subsidies can be used to purchase a private plan or traditional fee-for-service Medicare plan. The amount of the subsidy would be based on the average of all bids submitted by private insurers plus traditional Medicare, and a greater subsidy (so-called risk-adjustment payments to health plans) would be available for sicker Medicare recipients with higher medical expenses.

Opponents of the plan have argued that the subsidies wouldn’t keep pace with health care costs, increasing premiums and out-of-pocket expenses for seniors. In their latest budget, the House Republicans responded to critics by citing a 2013 report by nonpartisan congressional budget experts.

“In September 2013, the Congressional Budget Office (CBO) analyzed premium support options. They found that a program, in which a premium support payment was based on the average bid of participating plans, would result in savings for beneficiaries, as well as the Federal Government,” the budget said.

That’s not exactly accurate.

The CBO report does say that such a plan would reduce government spending on Medicare, and it does say that the average Medicare beneficiary would pay 6 percent less in 2020 than under current law.

But CBO also said that the cost would vary by region and that in “many regions” those who chose to remain in a traditional fee-for-service Medicare plan “would pay higher premiums than they would under current law.” That’s a point made last year by the liberal Center on Budget and Policy Priorities in an analysis of the fiscal 2015 House budget plan, which contained the same Medicare proposal. The White House sent us a copy of the analysis to support the president’s criticism of the GOP plan.

Center on Budget and Policy Priorities, April 8, 2014: The proposal’s impact on individual beneficiaries would differ depending on whether traditional Medicare or private plans cost less in their region, but it would disadvantage beneficiaries in at least two ways. First, in many regions, traditional Medicare would cost more than the premium-support voucher, so beneficiaries who chose to enroll in traditional Medicare would have to pay higher premiums than under current law.

The CBO was in agreement on that point. But then the center speculates on what would happen in future years — saying, for example, that if the risk-adjustment payments are “inadequate” then more seniors would abandon traditional Medicare and ultimately the system would “unravel.” That’s a matter of opinion.

The fact is the CBO analysis shows that the immediate impact would be less dire. Medicare would still exist, and it would cost less on average. It would cost more for some and less for others. What happens in the future — and how future Congresses deal with the intended and unintended consequences of the law — is unknown.

— Eugene Kiely