See
How the Affordable Care Act Failed by Mark Warshawsky of Mercatus.
"The main motivation for the Affordable Care Act
initially stated by President Barack Obama was to "bend the curve": to
slow the rapid growth in health care spending that the United States has
experienced for the last several decades. Subsequently, the stated
primary motivation for the law has shifted to increasing insurance
coverage, but the White House (mainly through its Council of Economic
Advisers) has still tried to claim in the last couple of years that it
has been having a favorable effect on slowing the growth of health care
spending and prices. Indeed, this latter policy reason has always been
the more sensible one for health reform on political and economic
grounds.
The vast majority of Americans have always been
well covered by health insurance – either through their employer or the
government – and those who were not covered were either eligible for
coverage (e.g., through Medicaid or individual insurance) but opted out,
or got medical treatment through out-of-pocket payment, charity care or
other means. But the rapidly rising cost of health insurance and health
care has increasingly and severely impinged upon all working
households, retirees, businesses and governments – lowering labor
earnings, hitting middle-class workers particularly hard, increasing
inequality, reducing spendable resources, increasing government
deficits, and crowding out other government spending, while having
uncertain benefits, at the margin, of improving health outcomes.
Therefore it is worth examining whether the
Affordable Care Act is succeeding according to the original and still
relevant assertions of its designers and advocates. Recent data gives a
strongly negative answer.
Consider in the first instance the just released
annual report
from the Centers for Medicare and Medicaid Services on national health
spending.
In 2015, total health spending increased 5.8 percent; on a
per-person basis, it increased 5 percent, reaching $9,990. This follows
five years of historically low growth (2009 through 2013), likely caused
by the recession, but 2014 also saw a pick-up in spending growth, at
5.3 percent. These recent rates of increase have outpaced economic
growth;
whereas health spending as a share of GDP had stabilized at an
average of 17.3 percent in the early part of the decade, it rose to 17.4
percent in 2014 and jumped to an all-time high of 17.8 percent in 2015.
Stated another way, we are now spending nearly
one out of every five dollars of our national income on health care, far
in excess of other developed countries. Although increased spending by
the federal government is largely explained by the expansion of Medicaid
and exchange subsidies coming directly out of the health care law,
spending on health care also increased rapidly in 2015 in the household
and private business sectors, with negative implications for take-home
pay and spendable resources. Household spending, including out-of-pocket
spending, contributions to private health insurance premiums and to
Medicare through payroll taxes and premiums, increased 6.9 percent in
2015, after declining in 2014. Growth in spending by businesses (mainly
contributions to employer-sponsored private health insurance premiums)
increased 5.3 percent in 2015, up from 4.7 percent in 2014. In summary,
we see here strong evidence for an unbending of the curve.
Another
recent report,
focusing on employer-sponsored insurance for Americans younger than age
65, also shows that health care spending and prices are increasing
again.
The Health Care Cost Institute gets its data directly from the
four largest health insurers in the nation. It finds that in 2015
spending per capita increased by 4.6 percent, much faster than the prior
year's growth of 2.6 percent. The increases were widespread across
different demographic groups, regions and service categories, but were
higher for younger people, in the Northeast, for outpatient visits and,
especially, prescription drugs.
Health care cost growth can be decomposed into
changes in the number of services provided ("utilization") and prices
paid for services. Utilization of health care services actually
decreased or increased modestly across categories of health care
services in 2015, but prices increased by 3.5 percent for outpatient and
professional services, by 6.6 percent for acute inpatient and by 9
percent for prescriptions. Even adjusting for intensity – that is, more
complexity of services – prices increased by 2 to 4.5 percent, much in
excess of general price inflation. Again, we gain an impression of
health care spending and prices rising beyond our national and personal
means, despite, or even because of, the Affordable Care Act.
Finally, let's look at increases in medical care
prices, compared to general consumer price inflation, as measured by
the Bureau of Labor Statistics. The graph below charts out the 12-month
percentage change in medical care prices (blue) and general consumer
prices (red) over the last 10 years. We see the big drop in general
inflation owing to the Great Recession in 2009, and again in 2015, owing
to the decline in the price of gasoline. Medical care price inflation,
although showing some slow-down in 2013, has picked up noticeably in
2015 and 2016, and is now running at about 5 percent, even as general
price inflation is about 1.5 percent.
Mercatus Center at George Mason University
These recent statistics are highly damaging to
the original and reasonable motivation for the Affordable Care Act – to
bend the health care spending and cost curve downwards. In fact, we now
seem to be going in the opposite direction, perhaps because the extra
tens of billions of dollars being expended by the federal government on
health care are adding fuel to the fire. The incoming Trump
administration, in addition to repealing the health care law, would be
wise to design health policies that will slow the growth in health
insurance premiums and health care costs, thereby increasing worker
take-home pay and spendable resources for all Americans and reducing
government spending and deficits."
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