Obamacare Hasn’t Slowed The Growth of Health Care Costs – It’s The Economy, Stupid!

Obamacare Hasn’t Slowed The Growth of Health Care Costs – It’s The Economy, Stupid!

Focusing on the annual rate of growth in health spending ignores the real threat.
Tom Coburn
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Obama administration advisors and supporters have been arguing that Obamacare and its grand designs to reshape health care have been a primary reason why health care costs have slowed.  Yet, the facts and data the real world – rather than the world of unreality in which people can keep their doctors and plans if they like them until they can’t – show that the old James Carville adage is still correct.  When it comes to the slowdown in health costs, it’s the economy, stupid.

This week, Jason Furman, head of the President’s council of economic advisers, penned a piece in the Wall Street Journal entitled “Obamacare is slowing health inflation” in which he pointed to an annual report on health care spending from the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) to show that Obamacare has helped slow or reduce health costs.

The problem is the report does not say what Furman suggests it says.  In fact, the report actually acknowledged that the main driver of the temporary slowdown in the rate of health care growth was not Obamacare, but an economy shaken by the Great Recession.  Since World War II, the historical pattern is that the annual increase in the rate of health care spending slows a bit during periods of economic turmoil or recession, as consumers lose their health coverage or have fewer dollars to spend on care.

In a comprehensive study on this phenomenon, the Kaiser Family Foundation used statistical analysis to examine 50 years of health spending and economic trends.  The study found that the economy produces a major but delayed effect on the nation’s health spending, and attributes 77 percent of the slowdown due to poor economic conditions.  In other words, the economy is not a factor, but the factor.

The CMS report itself underscored that the slower-than-average annual growth in health care spending was attributable to a weak economy.  “The relative stability since 2009 primarily reflects the lagged impacts of the recent severe economic recession,” the report explained. Because millions of individuals lost their employer-provided health insurance or could not afford to keep their health coverage, “there was a slow recovery from private health insurance enrollment losses that occurred in 2008-2010” the analysts concluded.

This sentiment is echoed numerous times throughout the report, and is also consistent with the actuary’s analysis in January 2013.  CMS analysts even went out of their way to be clear that the health care law was not a big driver in the small reduction in cost growth in 2012.  They write that provisions in “the Affordable Care Act … had a minimal impact on overall national health spending growth through 2012.”  In fact, Anne Martin, a CMS economist and the primary author of the study, pointed out to the press that we spent “more on health care between 2010 and 2012 due to the Affordable Care Act.”

Furman also purposefully chose to cherry-pick a few rosy examples to obscure the bigger picture.  For example, he says “the ACA is directly responsible for a substantial portion of slowdown in Medicare’s growth over the past few years.”  That claim sounds great, but the CMS report actually notes that the slowdown in 2012 was “driven primarily by a one-time payment reduction to skilled nursing facilities.”

Here’s another example.  Furman says the health care law “is helping to boost employment, lower deficits, and bolster wage growth.” While employment has made slow gains rebounding since the depths of the 2008-2009 recessions, millions of Americans are still struggling to find work or are underemployed.  Deficits have declined marginally, but that’s hardly because of the President.  The Administration is still advocating the same Big Government spending agenda that will slow our economy through debt and the demand for higher taxes.

Perhaps the most egregious citation sleight-of-hand is Furman’s attempted rebuttal of the claim that the health care law would be a “job-killer” by noting there have been “7.9 million private jobs added since the ACA.”  Any new job is a good thing but the economy has yet to demonstrate it is on track to fill jobs at a level that will reach full employment any time soon.

Moreover, the claim that the ACA will kill jobs is not mere rhetoric.   The nonpartisan Congressional Budget Office found that, thanks to the ACA, if you like your job, there’s no guarantee you can keep it.  CBO found the health care law will reduce the workforce by 800,000 jobs over a decade.  And because the CBO does not conduct industry-specific assessments of potential job losses, the job loss tally could grow far higher.

Plus, headlines for months have warned of companies reducing workers’ hours and choosing not to hire new employees because of the law’s overly restrictive regulatory definition of a full-time employee as anyone who works 30 hours.  Other headlines have told the story of health care providers and medical device manufacturers who have had to lay off staff due to the law’s damaging cuts and taxes.

Finally, while Furman argued the CMS report demonstrates “important progress” in curbing runaway health spending, he ignores the coming flood of health spending and other mandates that are set to kick in this year.  Does the administration plan to say that cancelling people’s health insurance and setting up rationing boards is one way to curb costs?

But the big data point that has been missed is that last fall, the actuary’s office at CMS explained the ACA will actually increase health care costs moving forward.  They noted, “In 2014 the implementation of provisions of the [law] related to major coverage expansions are expected to accelerate health spending growth.”

The CBO also projects that under Obamacare, the annual Medicaid spending will grow at a rate of eight percent.  By 2022, annual Medicaid spending will approach three-quarters of a trillion dollars.  The total cost of the insurance coverage expansion under the law is $1.3 trillion dollars over the coming decade.

Time will tell who is correct but the American people have little reason to trust the administration’s predictions.  All sides want to slow health costs but history shows innovation, competition and free markets are far better at making scarce and costly goods and services more available and affordable than government.   The ACA is likely to once again confirm that the best way to make something expensive is for government to make it “affordable.”

Tom Coburn, M.D., is a U.S. Senator from Oklahoma.

Photo by The White House
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