(CBS)
Lower Premiums by $2,500 for a Family of Four ??????

"If you've got health insurance through your employer, you can keep your health insurance, keep your choice of doctor, keep your plan," Mr. Obama said in his Oct. 15, 2008 debate against Sen. McCain. "The only thing we're going to try to do is lower costs so that those cost savings are passed onto you. And we estimate we can cut the average family's premium by about $2,500 per year."

This campaign promise is the trickiest to explain and to evaluate. Mr. Obama gave this figure repeatedly, but he was not being completely forthright about what he meant. His administration never expected families to see savings of $2,500 in premiums; instead, his advisers calculated the total cost savings for both individuals and the government.

"The original arithmetic was somewhat basic," the Times reported in July 2008. "In May 2007, three Harvard professors who are unpaid advisers to the Obama campaign... produced a memorandum offering their 'best guess' that a menu of changes would produce savings of at least $200 billion a year... That would amount to about 8 percent of the $2.5 trillion in health care spending projected for 2009, when the next president takes office...The total savings were then divided by the country's population, multiplied for a family of four, and rounded down slightly to a number that was easy to grasp: $2,500."

The changes expected to produce the savings included reduced administrative costs ($46 billion), improving preventive medicine and chronic disease management ($81 billion), and investments in digitizing medical records ($77 billion).

Yet whether those changes would produce those savings is suspect. The Times explained then that the costs were drawn from recent studies -- for instance the figure of $77 billion in savings achieved through health IT came from a RAND study. That study, however, says that such savings would take 15 years to reach.

Moreover, the nonpartisan Congressional Budget Office (CBO), under the leadership of then-director Peter Orzag (now Mr. Obama's Director of the Office of Management and Budget), decided that RAND appeared to "significantly overstate the savings for the health care system" from health IT, the Wall Street Journal reported.

The study in Health Affairs is backed up by the CBO's own recent findings.

"Although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall," CBO Director Doug Elmendorf wrote on the Director's Blog last month. In defense of preventive medicine, he at least added, "Of course, just because a preventive service adds to total spending does not mean that it is a bad investment."

In spite of all this, it looked in May as if Mr. Obama might have been able to keep his promise, when the health care industry appeared to offer $2 trillion in spending reductions over 10 years to help pay for the president's reforms. The administration enthusiastically said this was enough to reduce costs by an average of $2,500 for a family of four.

However, health care leaders either did not clearly spell out their intent to the White House or reneged on their offer, claiming days later that they never agreed to such large cost reductions, the New York Times reported.

In addition, the health care legislation coming out of the Senate Finance Committee could even actually result in higher premiums for customers -- the insurance industry is threatening that the $6 billion industry-wide fee and other taxes Sen. Baucus has proposed will be passed on to consumers.

What this all means is that it may be years or decades before any overall savings from Mr. Obama's plans materialize -- if they do at all.




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