A Republican health-care plan to lower insurance premiums relies on cutting paymentsto hospitals and doctors to the same level as federally-setMedicare rates and would require billions of dollars in extragovernment spending, according to an independent analysis of thepolicy.

The Republican amendment made Thursday adds what’s calledthe Federal Invisible Risk Sharing Program to the legislationto help appease conservatives and get the bill through the House.At a committee meeting to make the changes, one GOP congressmansaid it would lead to substantially lower premiums.

“We had an actuarial firm that did an analysis of this,” GaryPalmer, a Republican from Alabama who was one of the drafters, saidThursday. “What we believe will happen is a significant reductionin premiums.”

However, according to a 27-page assessment released Friday bythe consulting firm Milliman Inc., such a proposal would likelycost the government far more than the $15 billion total over nineyears that Republicans have provided for, and rely on essentiallypaying government-set rates paid to hospitals, doctors and otherhealth providers to care for some sick individuals.

More expensive

Milliman analyzed several scenarios based on who gets coveredunder the program, and whether hospitals and doctors get paid atMedicare rates, or the higher amounts typically paid by mostprivate insurers. Under one scenario, at the lower Medicare rates,the program would cost $6.59 billion a year, and would lowerpremiums by 16 percent to 31 percent. If higher commercial rateswere paid, it would cost $11.3 billion a year, and reduce premiumsby 12 percent to 23 percent. The estimates include other changes toinsurance rules.

Without either the additional government spending or the pricecaps, there would be little effect on premiums, according to theanalysis. If funded and successful, it would decrease the number ofpeople without insurance by about 1 million to 2 million.

House Republicans are struggling to revive the legislation,known as the American Health Care Act, after pulling it froma vote last month because they lacked the votes to pass it. HouseSpeaker Paul Ryan told reporters Thursday that the change to thelegislation “makes this a much better bill.”

“This amendment alone is real progress and it will help us buildmomentum toward delivering on our pledge to the country” to repealand replace Obamacare, Ryan said Thursday.

The Milliman analysis was requested by a conservative groupcalled the Foundation for Government Accountability, a think tankthat supports the proposal. Congressman Palmer’s press officedidn’t reply to an email and a phone call with questions about theMilliman report.

Price controls?

David Anderson, a health policy researcher at Duke University,said that the policy looked like a price-control program.

“It is structurally single-payer for the chronically ill andexpensive, with a private sector front-end sorting system,” saidAnderson.

Republicans have typically opposed that sort of policy, andthere were signs of immediate skepticism on Thursday.Representative Louie Gohmert, a Texas Republican and member of theconservative Freedom Caucus, said he was worried the program wouldjust “give the federal government more power and more money.”

The Republican plan would subsidize the costs of expensive, sickpatients -- using subsidies to keep down insurance premiums for allby making sure that people with costly conditions don’t drive uppremiums for the rest of the population.

Under the Milliman analysis, if health insurers kept payingregular rates, instead of the lower Medicare rates, or if therewasn’t any federal or state funding, “the premium reduction wouldbe 0 percent.” Milliman is an actuarial and consulting firm basedin Seattle that frequently analyzes the effect of government policychanges.

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