ObamaCare Doesn’t Deserve Credit For Health Cost Slowdown

America’s health spending is down, growing at the lowest rate in over 50 years. The Obama administration has been quick to take credit, boasting that the Affordable Care Act has “begun to curb rising health costs across the system.”

The president is indeed responsible for the slowdown in health spending. But not because of anything his health reform law has done.

Instead, America’s flagging economy — which President Obama has overseen for more than four years now — is the culprit.

Contrary to the tale spun by the administration, ObamaCare will exacerbate America’s longstanding health cost crisis, after its remaining provisions take effect next year.

The past few years have offered a bit of relief to households struggling with ever-more-expensive health care.

Premiums for employer-based family coverage climbed just 4.5% last year, after modest increases in 2009 and 2010. That’s well below the average annual growth rate over the past several decades.

The Kaiser Family Foundation attributes more than three-quarters of the recent slowdown in health-cost growth to the recent recession.

The rest resulted from “structural changes in the health system” — including changes in the way care is delivered and increases in “deductibles and other types of patient cost-sharing.”

That makes sense. Consumers are far more judicious about their spending when their money is on the line.

High-deductible plans have grown from virtually non-existent just a few years ago to the second-most popular type of plan nationwide, with almost 20% of the market. HDHPs are generally paired with health savings accounts, which allow patients to use pre-tax money to cover routine health expenses.

These arrangements save money. The Robert Wood Johnson Foundation has calculated that such plans reduce total health care spending by 5% to 14%.

Expanding the share of employers with HDHPs to 50% would reduce national health costs by $57 billion a year, according to RAND Corp.

ObamaCare pushes national health spending in the opposite direction. The president’s own number-crunchers expect national health spending to jump 7.4% in 2014, with 2.1 percentage points of that due entirely to ObamaCare.

Over the next decade, they figure spending will continue to climb at about 6% annually.

Two big reasons why: ObamaCare’s guaranteed issue and community rating regulations, which require insurers to sell policies to all comers, regardless of health status or history, and restrict what they can charge them.

A survey of major insurers in five big cities conducted by the American Action Forum found that premiums for younger and healthier individuals and small businesses will climb by an average 169%.

That’s in large part because of community rating. Insurers can’t charge older folks more than three times what they charge young adults — even though the oldsters generally consume more care.

So premiums for young people will rise to subsidize the care of older people.

Consulting firm Oliver Wyman figures that 6 million individuals will pay more under ObamaCare — even after taking into account the subsidies the law will provide to virtually everyone who makes less than 400% of the federal poverty level.

Maryland’s largest insurer — the non-profit CareFirst Blue Cross Blue Shield — told the state that it would need to hike premiums in 2014 an average of 25% for individuals and 15% for small businesses because of ObamaCare.

Its younger beneficiaries could face premium increases of 150%. If the state denies its requests, CareFirst says it will lose money.

And then there is the panoply of new taxes and fees on insurers and employers that will drive health costs even higher.

An $87-billion tax on insurers will tack on nearly 3% a year to premiums all by itself. The administration also wants to impose a 3.5% surcharge on policies sold through federally run exchanges. Plus, the government will impose a $63 fee for every person that an employer covers.

Add it all up, and ObamaCare will not arrest the growth of health costs in America, as its proponents claim.

Rather, it’s setting the nation on a permanently higher health spending track — starting next year.

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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