Every Presidential debate annoys me, and not because of the usual banter of who's the better candidate to lead the country, but because at times, each candidate states a "fact" that clearly deviates from the "fact" the other states. In last night's debate, the third and final Presidential debate, the big dispute was over the average cost of health care insurance.
According to Senator Obama, the average cost of health care insurance is $12,000. Senator McCain stated the cost to be $5,800. So who is right and who is wrong?
Unfortunately the answer is: it depends on who you ask. Below, we've highlighted all the data currently available.
1. The Association of Health Insurance Plans, an insurance trade group,
conducts a survey of individual policies each year. In December 2007,
they issued a report with information about average premiums sorted by age, as well as average premiums by state.
The report states that nationwide, annual premiums averaged $2,613 for single coverage and $5,799 for family plans in the 2006-2007 period. This is where McCain most likely obtained his numbers, though some would argue that information obtained from industry associations is not reliable, given the goals of the association: promoting private insurance plans.
The report goes on to state that for single policies, annual premiums ranged from $1,163 for persons under age 18 to $5,090 for persons aged 60-64. For family policies, premiums ranged from $2,325 for policies covering children under age 18 to $9,201 for families headed by persons aged 60-64.
The limitation of relying on this study is that it is only based on individual policies and does not incorporate the costs of corporate insurance policies.
2. The National Coalition on Health Care, the nation's largest non-profit, non-partisan alliance working to improve America's health care, places the average annual cost that a health insurer charges an employer for a
health plan covering a family of four at $12,100 (2007 estimate). This relays the true cost of the insurance to the employer, even though the average cost per employee for family coverage is estimated at $3,300.
The information comes from a 2007 report by the Henry J. Kaiser Family Foundation which goes on to state that the average annual cost for health care premiums for individuals is $4,500, of which the average person actually pays $694.
A major limitation of this study is that it only addresses employer-sponsored health care plans, leaving out the 40 percent of Americans (U.S. Census Bureau number) not covered by corporate health care plans. But it seems, Senator Obama still used the $12,000 estimate for health care costs, even though that estimate pertains for corporate costs for families of four, not the actual cost felt by employees, and does not account for those without corporate insurance.
3. A third study conducted by Leighton Ku of
George Washington University and Matthew Broaddus of the Center on
Budget and Policy Priorities compares the costs of Medicaid to
individual health care plans. The study found that average medical expenditures per person are lower under public programs like Medicaid or the State
Children's Health Insurance Program (SCHIP) than under private insurance.
Specifically, the study places the cost of insuring those on Medicaid at $5,700 versus $7,000 per year for private policies, after adjusting for the poor health of Medicaid recipients on average.
So what can we make of all this?
For one, it's a clear lesson on how to lie with statistics if you're a politician. But to be more academic, the answer is complex.
At a glance, McCain's numbers seem more accurate since they rely on numbers at the individual level. In reality, neither estimate is completely fool proof.
Let's start with the estimate McCain uses - an estimate of the cost of private health insurance for families at the individual level (i.e. no corporate coverage). Unfortunately, unlike corporate health care providers, insurers for individuals have the option of "cherry picking" who they cover. The term "preexisting medical condition" is often used as a means for denying coverage to individuals deemed too risky or too expensive for insurance providers to take on at an individual policy level. As a result, those selected for individual policies tend to have fewer medical problems, which keeps premium costs lower for those individuals and others in the system.
In contrast, corporate health policies must admit all employees into the health care plan. Unlike individual policy plans, corporate plans cannot exclude a person on the basis of a preexisting medical condition or any other risk actor. This raises the cost of medical expenses the insurer ends up paying for those covered under the plan, which in turn raises the costs of the health care premiums for that plan for the employer. Some expenses may be passed to the employee, depending on what percentage of the health insurance premium the employer decides to pay for each employee.
All of this means McCain has chosen to use the least expensive estimates of health care while Obama chose to cite the priciest estimates possible. In reality, the average cost of health would be an average of medicaid/medicare costs, individual policy holders, and corporate health plans weighed by the percentage of enrollees for each plan, 27 percent, 9 percent, and 60 percent, respectively. The remaining percent are covered by military health care (4 percent) or are uninsured (16 percent). (Percentages do not sum to 100 because some people have more than one type of health care coverage.)
In summary, the actual annual cost would likely fall around $9,000-10,000 per year, per family. This means both candidates are using erroneous numbers. Anyone surprised?
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