Paul Krugman
November 6, 2009

House Republican leaders have produced their own health care reform bill. Here is the first thing you need to know: It would do almost nothing to reduce the scandalously high number of Americans who have no insurance. And it makes only a token stab at slowing the relentlessly rising costs of medical care.
Despite that, the Republicans are pitching their bill as far more affordable than the Democrats’ approach. And you are sure to hear a lot in coming days about how it could reduce health insurance premiums. How it compares in that respect with the Democratic proposal is not yet clear. But a lot of the Republicans’ savings on premiums come from reduced coverage. Pay less and get less.

The good news is that this bill has no chance of passing. The bad news is that unless the White House and Congressional Democrats push back with the hard facts, the Republicans could use it to spread false hope of a “cheaper” alternative to scuttle real health care reform.

There’s no question that the Republicans’ bill is cheaper because it does so little to help the uninsured. According to the Congressional Budget Office, it would provide $61 billion over 10 years to expand coverage, compared with more than $1 trillion in the Democrats’ bill.

That paltry effort, the budget office estimates, would extend coverage to a few million people who would otherwise be uninsured in 2019, leaving 52 million citizens and legal residents below Medicare age without coverage or about 17 percent of that population, right where it is today. This is a dismaying abdication of responsibility.

The Republican bill is an amalgam of market-oriented and state-based reforms that conservatives have long proposed, including enhancement of tax-sheltered accounts to help pay premiums and allowing people to buy insurance in other states that might permit skimpier benefits than their home state.

It has some good provisions, such as prohibiting insurers from imposing annual or lifetime caps on what they will pay and automatic enrollment of workers in employer-sponsored group coverage. But it would not prevent insurers from denying coverage or charging higher premiums based on pre-existing conditions.

The Republicans have been railing that the Democratic reforms will do little to slow the rapid rise in medical costs. But neither party has a solution. The Republican bill would cap malpractice awards — a clear infringement of the rights of injured patients. It would get lesser savings by requiring electronic transactions for administrative tasks and opening an approval process for generic biological medicines. The Democratic bills would use both of those for savings and initiate an array of pilot projects to try to find solutions.

The Republican bill’s main emphasis is on reducing the cost of health insurance premiums, a real concern. Compared with current trends, the Congressional Budget Office estimates that under the Republican bill, the average premium would drop by 7 to 10 percent for employees enrolled in group plans at small businesses and by 5 to 8 percent for people who buy their own policies. At large employers, where most Americans get group coverage, the average premium might drop by a modest 0 to 3 percent.

Part of the premium reduction was attributed to savings in the cost of medical services. But much was attributed to shrinking the services covered. The Democrats plan to set minimum benefit requirements to protect people from skimpy policies that leave them without adequate protection when they need it.

The budget office is planning to estimate how the far more complex Democratic bills would affect premiums. Americans need to know that so they can make a full comparison. But there should be no illusions here. The “affordable” Republican health care reform isn’t health care reform.