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Consumer Group Finds Use of Outdated Data and Other Major Flaws in Economist's Defense of Mandatory Purchase of Private Health Insurance
Date:2/12/2008

SANTA MONICA, Calif., Feb. 12 /PRNewswire-USNewswire/ -- A consumer group today released a critique of a report by MIT economist Jonathan Gruber supporting mandatory purchase of private insurance which used 30-year-old data to show that most Americans are "over-insured" and to defend the affordability of the plan.

Download the Foundation for Taxpayer and Consumer Rights' (FTCR) critique of Gruber's report: http://www.consumerwatchdog.org/resources/MandatoryInsuranceCritique.pdf

FTCR identified major flaws in Gruber's report, including that it:

-- Relies on 30-year old data to conclude that most people are "over-insured," utilizing too much health care unless they face punitive co-pays and deductibles. However, this study is both out-of-date and flawed by the unrepresentatively low out-of-pocket costs of the plans studied. Today, yearly premiums for a family of four top $12,000 annually, and over the past six years, the amount families pay out-of-pocket each year for their share of premiums has increased by about $1,500. Nearly one out of four Americans under the age of 65 -- 61.6 million people -- is in a family that will spend more than 10% of its pre-tax income on health care costs in 2008.

-- Relies on an out-of-date health insurance profit and overhead figure of 12% and avoids discussing the explosion in insurer profitability since 2000. Some experts say that up to 50% of overall health spending now goes to clinical and insurer administrative waste, inflated prices, and fraud by doctors and hospitals.

-- Relies on unsubstantiated notions, originated by insurers themselves, that requiring Americans to buy unaffordable and poor quality health insurance policies is a necessary component of reform.

-- Assumes that the insurance market is highly competitive, ignoring extreme market consolidation that will inevitably lead to higher prices and skimpier benefits, as the Massachusetts experience is already demonstrating. Since 1994, there have been more than 400 mergers of managed health care companies. The nation's two largest health insurers, WellPoint and UnitedHealth, control 33 percent of the U.S. commercial health insurance market. In 280 of the 294 U.S. markets, one health insurer accounts for at least 30 percent of the combined HMO/PPO market.

The mandatory purchase proposal became part of the national debate on health care reform after Massachusetts passed such a law last year. California legislators voted down a similar proposal in January, and other states are considering the plan.

Gruber has acknowledged the Massachusetts program's failure to make health care affordable, arguing that the solution is higher financial penalties against consumers. "The mandate has to be enforced," Gruber told the Boston Globe, saying that "[w]e need to think beyond what looks mean and do what's right."

FTCR is a nonprofit and nonpartisan public interest watchdog. For more information, visit us on the web at http://www.ConsumerWatchdog.org


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SOURCE Foundation for Taxpayer and Consumer Rights
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