Yesterday, Yuval accurately described the latest Obama Medicare ad as a “pack of lies from top to bottom.” He concludes:
In other words, the ad pretends Obamacare does not exist, ignores the reality of the Romney Medicare proposal, and presents a series of flatly untrue claims in its place.
I suppose that, because it doesn’t directly accuse Mitt Romney of killing anyone’s wife, such an ad actually qualifies as an elevation of the Obama camp’s rhetoric. But it’s still a pack of lies.
I’ve weighed in with my own analysis. Here is what I have to say about the ad’s claim that “insurance companies could keep raising rates,” something which has been a great source of confusion for the media. Indeed, by the very nature of the Romney plan, insurers would not be able to raise rates above those of their competitors, including the government, without losing market share.
Because the competitive bidding system would reward those plans that were least costly, insurers would have no incentive to “keep raising rates” in a way that outpaced medical inflation, because if they did, their competitors would swoop in with lower bids. And, as I note below, the two lowest bids in any region are fully subsidized by the government, exposing seniors to no extra costs.
In contrast, traditional Medicare keeps paying out claims without any regard to cost-efficiency, driving spending higher, and increasing the cost of health care for every American. As Amy Finkelstein of MIT showed in a widely-cited paper, Medicare’s impact on increased hospital spending is over six times greater than what a normal expansion of health insurance would have been expected to yield.
And if the private insurers are not as efficient as traditional, government-run Medicare—an article of faith among liberal health wonks—then it would be the “public option” that would retain market share, by virtue of its lower prices, in a competitive bidding system. Hence, private insurers would have no flexibility to “keep raising rates” unless the government-run plan did also.
APOTHEFACT CONCLUSION: Insurance companies could not keep raising rates, because doing so would cause them to lose market share to other private insurers, and to the government.
This is a point that is worth understanding, as it is a claim that Democrats have been making without any pushback from unskeptical media outlets.
— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. He is a member of Mitt Romney’s Health Care Policy Advisory Group. You can follow him on Twitter at @aviksaroy.
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