March 22, 2013

Dear Affordable Care Act Supporters: You Call This ‘Saving Money’?

Proponents of the Affordable Care Act (a.k.a. Obamacare) have long claimed that the law’s provisions would “bend the cost curve” of American health care. The argument was that the combination of exchanges, the Medicaid expansion, and the other provisions tucked away in the law’s thousands of pages would fix many of the structural problems that have driven health care costs in this country. Of course, the law did no such thing. As the Wall Street Journal reaffirmed today, health care costs are on the rise for families across the country — and are poised to increase especially rapidly next year. (Emphasis mine.)

Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation’s biggest firm projecting that rates could more than double for some consumers buying their own plans.

The projections, made in sessions with brokers and agents, provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year — a subject of rigorous debate.

That is the personal cost. What about in the aggregate? The Manhattan Institute released a study on Tuesday about the health care “savings” we could expect under the law to provide clarity to this question.

And how much will Obamacare save Americans overall? The answer: nothing. Or more accurately, Americans can expect to pay more for health care in total because of “Obamacare” than if the law . . . was never enacted. (Emphasis mine.)

Today, Americans spend well over $2 trillion — close to 18 percent of GDP — on health care, and U.S. health-care costs have grown much faster than either income or GDP growth over the last several decades. However, despite the best intentions of its supporters, Obamacare will not make much of a dent in these trends. The Centers for Medicare and Medicaid Services (CMS) projects that between 2012 and 2021, America will spend $36.8 trillion on health care. Absent Obamacare, CMS estimates that spending would be $36.3 trillion — a difference of just $500 billion over ten years. In other words, without Obamacare, Americans would spend less on health care.

The chart:

Folks, our political betters actually bent the cost curve up, not down.

Why will costs rise? Because the ACA did not fix the cost problems; as I told the St. Louis Beacon in a story published this morning, the law doubled-down on them. Instead of applying market pressures to get the cost of care down, the law just shifted how we pay for care. From the Manhattan Institute (emphasis mine):

As noted earlier, the law shifts health-care costs from individuals to government, with the overarching goal of reducing the share of health-care spending borne by low- and middle-income uninsured consumers. The problem is that evidence strongly suggests that when out-of pocket spending is lower, health-care spending actually rises.

Why would anyone implement an “affordable care act” that was anything but?

A project of the


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