The most popular story on the Forbes.com website at this moment (Monday afternoon) is headlined “Obamacare Will Increase Health Spending By $7,450 For A Typical Family of Four”. Wow! That sounds bad! Until we see how this nonsense-number got calculated (under the fold)!
So I have taken the latest year-by-year projections, divided by the projected U.S. population to determine the added amount per person and multiplied the result by 4.
This is sheer deception. Its intent is to make the casual reader think that a “typical” family will spend over $7000 it can ill afford on health care because of Obama. For at least three reasons, this is absurd.
First, it turns out that the $7450, which we will see does not mean what the headline implies, represents not an annual cost as you would naïvely think, but is spread out over ten years. You have to read the article to discover that. If the government actuaries had done 100 years of forecasting, instead of just 10, Forbes would have given us the even scarier headline that it would cost $74,500.
Next, the article conflates what will be spent per capita with what each person will have to pay for health care. The impression is either that the family will have to spend $7450 itself, or that the government will add $7450 to each person’s share of the hated National Debt. The article links only to the government actuaries’ reports on expenditures. They forgot (cough!) to mention the increased revenues from Obamacare, which exceed the increased expenditures. Yes, in toto, the provisions of Obamacare, by official estimate, bring in more than they spend out, saving money, reducing the deficit. Unfortunately for the conservative argument, overall health costs have been increasing more slowly than expected.
The most sophisticated error is conflating two types of “average”—a regular component of statistical sleight-of-hand. Forbes’ chart [click for chart: not included for possible copyright reasons] contrasts the average spending of over $700 per year with Obama’s claim that a “typical” family would save $2250 per year. We have already noted that it makes no sense to compare gross spending with net savings, ignoring revenue. However, this claim also suffers from ambiguity about the precise meaning of “average” and “typical”
The $7450 figure is calculated as a mean, what we colloquially call an average. By “typical”, Obama is evoking the median family. Remember, the median means half of American families have higher income, and half less. In theory—not that this would happen under our political system—the entire additional cost of Obamacare could be borne by the wealthiest 1%, leaving everybody else (including, by any reasonable definition, all the “typical” families) unaffected. In fact, the 1% are contributing a big share of the revenues, with surtaxes for persons who earn over $200,000 per year ($250,000 for joint filers). Yes, the 99% are contributing too, especially those who prefer to pay a penalty (and gamble with their health) than get insurance. But the effect on the median family simply can not be determined from the information given. More honest sources than Forbes have cast doubt on the magnitude of the savings for the median family, so I won’t defend the $2250 estimate. The difference is probably positive but not by that much; we can't tell from the information given. Even if the savings are so skewed that the Obamacare is a bad deal for typical families, you still can’t show this by comparing a mean of one thing to a median of another in Forbes' way; it’s not apples and oranges, more apples and carburetors.
Most dispiriting, this statistical travesty is not the product of an innumerate radio blowhard. It comes from a Ph.D. scholar with the Center for Health Policy & Inequalities Research at Duke University, who is also (no surprise) affiliated with the American Enterprise Institute and George Mason’s Mercatus Center. Once upon a time, the conservative movement was willing to make a serious contribution to the health care debate, viz., the structure of Obama/Romneycare. Now their loathing of the Democratic Party and nihilistic wrecking impulse leads them to say anything, even when they surely know better.
UPDATE: (Tuesday a.m.) I believe my first time on the Rec List. Thank you, and thanks to the editor who put me in the Spotlight.
Wed Sep 25, 2013 at 1:47 PM PT: The blunders in this article, including some I didn't catch (the author gets the effect of inflation on costs backwards!) are also reviewed here, here, here, and in its own comments section. Unfortunately, this piece of pretentious nonsense is bouncing around the right-wing echo chamber. Duke should be ashamed.
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