Another Broken Obama Promise: The Healthcare Cost Monster Emerges

The New England Journal of Medicine recently published an article for its special “Election 2012? edition signed by nearly two dozen economists and healthcare experts calling for a “systematic approach” to health cost control. Several of the co-authors used to be advisers to President Obama, including former budget chief Peter Orszag, former Clinton Chief of Staff John Podesta, and former Centers for Medicare and Medicaid Services head Donald Berwick.

But why are these liberal luminaries calling for a new “systematic approach?” Wasn’t Obamacare supposed to fix the nation’s health cost problems? The president promised it would, saying, “we can cut the average family’s premium by about $2,500 per year.” Earlier this year, House Minority Leader Nancy Pelosi (D-Calif.) went so far as to say “everybody will have lower rates.”

Like most of the promises made about Obamacare, the pledge that it will lower health costs is turning out to be completely bogus. In fact, it’s already raising health costs.

According to the Kaiser Family Foundation’s latest report on employer-provided insurance, the average family premium climbed 4.5 percent this year. That’s more than twice the current inflation rate — and comes on top of a 9.5-percent increase last year. In other words, since Obamacare was enacted, family premiums have climbed nearly $2,000.

For those who work at small businesses, the news is even worse. Family premiums shot up more than $1,100 this year alone — an 8-percent increase.

These cost hikes are just the beginning.

Obamacare seeks to impose a raft of new mandates on insurance, which will add to the cost of coverage.

Already, for example, the law bans lifetime caps on coverage, limits out-of-pocket expenses, and requires family plans to cover children until they turn 26. This third provision — the so-called “slacker mandate” — added as much as 3 percent to premium costs on its own, according to Towers Watson. The law also bans insurers from charging for care deemed “preventive” by the Health and Human Services Department.

Obamacare will also make it far more difficult for companies to control their own health costs. Over the past several years, businesses have been prudently experimenting with different types of benefit plans as a way to bring premiums under control.

The result, as the Kaiser study notes, has been a significant increase in the number of health plans that include higher deductibles. The thinking is that if consumers have a greater financial stake in their healthcare decisions, they’ll use medical care more prudently — and thus keep costs down. In exchange for taking on some of the initial costs of care, high-deductible plans offer much lower premiums than conventional policies.

The share of workers with deductibles of $1,000 or more went from 10 percent in 2006 to 34 percent in 2012. Among those employed by small firms, almost half are now in such plans.

The fastest-growing type of plan today is a high-deductible plan that includes a Health Savings Account, which lets families save money, tax-free, for out-of-pocket health costs.

Kaiser found that while just 4 percent of small businesses offered this sort of plan to their employees in 2005, 31 percent did so this year. These plans are now the second-most popular in the market, behind only PPOs.

Unfortunately, Obamacare is trying to halt this cost-control effort by imposing crippling restrictions on high-deductible plans.

For example, the law bans deductibles over $2,000 for single coverage. As a result, 14 percent of all workers — and 27 percent of those in small firms — will end up paying more for coverage after they’re forced into a government-approved plan.

And then there are the massive administrative costs Obamacare is imposing. The government has already written thousands pages of rules, including 18 pages just to define a “full-time employee.” The House Ways and Means Committee has concluded that complying with the law will require 80 million man-hours a year.

Even Obamacare’s backers admit that the law will boost premiums.

Massachusetts Institute of Technology economist Jonathan Gruber — one of the architects of Obamacare — has studied the law’s effect on premiums in the individual market in three states. In each, he found substantial increases in premiums — a 30-percent hike in Wisconsin, 29 percent in Minnesota, and 19 percent in Colorado.

Since Obamacare’s passage, the cost of health care has continued its upward march unabated. Only by repealing this monstrosity and replacing it with patient-centered reforms — with proven cost-control track records — can we make the American healthcare system work for everyone.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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