Pacific Research Institute

Obamacare Bloats U.S. Healthcare System

Forbes.com

Last month, the Organization for Economic Cooperation and Development, a developed-country think tank, released its latest estimates of how much the rich world spends on health care. Yet again, the United States took the top spot.

Our nation spends $8,713 per person on health care — more than double the OECD average. A separate analysis by Bloomberg puts U.S. spending even higher — at $9,146 per person.

Spending more money than other countries on health care is not necessarily a bad thing. After all, the United States is a wealthy nation and can afford the best care. And Americans want this care delivered in a timely manner.

But under Obamacare, that high level of spending isn’t buying the best care. The law’s numerous regulations and intrusions have simply inflated the nation’s healthcare tab — without actually improving the quality of care available to patients.

The United States has long spent more than other nations on care. Obamacare has just accelerated that trend, despite the law’s goal of reducing health spending.

Last year, health expenditures jumped 5.3 percent, up from an average of 3.9 percent over the previous six years, according to data from the Centers for Medicare and Medicaid Services. Government spending shot up 7.7 percent in 2014 — mostly because of Medicaid’s explosive growth under Obamacare.

Unless Obamacare is repealed and replaced, that trend will only continue. According to CMS, the nation’s health spending will increase by an average of almost 6 percent over the next decade. By 2024, health care will consume 20 percent of the nation’s economy — up from 17 percent this year.

That would be fine if the money being spent actually went toward health care. Instead, it’s ballooning the federal bureaucracy. CMS data show that government administrative costs surged 11 percent last year.

Overhead now accounts for 7.7 percent of health spending — an uptick from 6.7 percent when President Obama first took office. For context, that number was a mere 4.7 percent in 1980. By 2024, overhead will eat almost $9 of every $100 spent on health care.

According to an analysis of CMS data published in Health Affairs, Obamacare will add $273.6 billion in new administrative costs from 2014 through 2022.

But this is only the tip of the proverbial paperwork iceberg. CMS only counts overhead for the government and for insurance companies, not Obamacare’s massive compliance costs for businesses.

Those costs are enormous. A House Ways and Means subcommittee calculated that it will take 127.6 million hours to comply with all of Obamacare rules and regulations. According to the Small Business Association, small firms face an average of $15,000 a year in compliance costs.

The CMS report points to another way that Obamacare throws billions and billions of good healthcare dollars after bad. The data show that the number of uninsured dropped by 8.7 million last year. But almost all the gains came from Medicaid, the program for low-income Americans, which grew by 7.7 million enrollees.

The program now costs taxpayers $475 billion a year. Its costs are projected to increase almost 7 percent a year through 2023.

Unfortunately, those billions in new costs aren’t buying beneficiaries access to care. According to a recent study published in the Journal of the American Medical Association, just half of all doctors will schedule appointments with new Medicaid patients.

If enrollees can’t get access to doctors, they’ll go to the emergency room, where care is much costlier. States that refused to expand their Medicaid programs under Obamacare experienced a 1.8 percent increase in ER usage from 2013 to 2014. But in those that did expand Medicaid, ER usage went up 5.6 percent over the same time period. That’s bad news for the 31 states (including the District of Columbia) that have chosen to expand Medicaid to date.

Stuffing millions more unfortunate souls into the program will only exacerbate its underlying weaknesses, push costs up, and do little to improve the care enrollees can get.

Obamacare has encouraged waste in another, less direct way — by incentivizing Americans to use health care unnecessarily.

CMS data show that while overall health spending climbed 5.3 percent, out-of-pocket spending went up a mere 1.3 percent. The Obama administration thinks this is a win.

“The share of national health expenditures financed by individuals’ out-of-pocket payments fell to 10.9 percent in 2014,” White House chief economist Jason Furman noted, “the smallest share since these data began in 1960.”

Furman doesn’t bother to explain that this trend will fuel still more healthcare inflation. From the consumer’s perspective, if someone else is picking up the tab, he might as well get as much care as he can — regardless of whether it’s helpful. This increased demand pushes up health costs.

Free-market reforms try to tamp down these perverse incentives by empowering consumers to take more responsibility for their own healthcare decisions. They can then reap the financial rewards of living healthier lifestyles.

Consider Health Savings Accounts. Consumers can deposit cash tax-free into HSAs — which are paired with high-deductible, consumer-directed healthcare plans — and then spend that money on routine out-of-pocket expenses. Seniors on Medicare should be able to do the same.

Since consumers control their healthcare dollars, they have an incentive to spend that money wisely. And according to a recent study from the National Bureau of Economic Research, HSAs reduce costs without sacrificing health outcomes.

There’s no question that Obamacare has increased waste and overhead in the healthcare system. The law only makes our nation’s very real health spending problem far worse.

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