Obamacare drives up health care costs for everyone

The Centers for Medicare and Medicaid Services recently released their annual report on health care spending in America. And surprise, surprise – spending continues to grow. It amounted to 17.9 percent of the nation’s gross domestic product in 2010, or $2.6 trillion. But the annual rate of growth was lower than it had been most of the past 50 years – just 3.9 percent.

Naturally, the Obama administration took credit for this sliver of good news. “Thanks to the Affordable Care Act, we’re keeping costs down and making health care more affordable,” wrote Nancy-Ann DeParle, deputy chief of staff for policy, on the official White House Blog.

But an in-depth look at that report reveals that Obamacare has done little thus far to slow the growth of American health spending. In fact, the federal health care reform effort is already increasing the share of spending shouldered by taxpayers. Worse yet, the implementation of Obamacare has barely begun.

As the law’s various provisions begin to take effect, the pace of spending will only accelerate. The report was clear about what’s restraining health care spending – and it’s not Obamacare. As the report put it, the “impact of the recent recession continued to affect the purchasers, providers and sponsors of health care.” The agency’s researchers went on to cite “[p]ersistently high unemployment, continued loss of private health insurance coverage, and increased cost sharing” as reasons that “led some people to forgo care or seek less costly alternatives.” In other words, it’s the economy, stupid.

Obamacare may have actually increased national health spending. According to the centers’ report, “the projected net effect of (Obamacare’s) provisions on health spending in 2010 was approximately 0.2 percentage point.” That’s not much of an increase – but it’s an increase nonetheless. Senate Republicans have pointed out that the centers’ latest report is consistent with its April 2010 prediction that Obamacare would increase national health spending by $311 billion in the next decade.

And the government has gotten a head start on all that new spending. Federal health care disbursements increased from $530 billion in 2007 to $743 billion in 2010 – a jump of 40 percent. Medicare spending grew at a 5 percent clip, while Medicaid spending rose 7.2 percent, more slowly than the previous year. As a percentage of total health care spending, federal, state and local government expenditures increased from 41 percent in 2007 to 45 percent in 2010.

The president’s health care law will only exacerbate these long-term trends once it goes fully into effect. In 2014, the centers project that health spending will rise 8.3 percent, thanks in large part to Obamacare’s expansion of Medicaid to bring health care to 30 million more Americans and its new subsidies for Americans to purchase health insurance in the state-based exchanges. And by 2020, officials estimate that government will account for half of American health care expenditures.

But what about private health insurance? While campaigning for the White House, President Obama repeatedly pledged that his health reform package would lower the average family’s annual premiums $2,500 by the end of his first term. He’s got about a year to fulfill his promise – and it doesn’t look as if he’ll succeed. The report pegged the growth in spending for health insurance premiums at 2.4 percent in 2010. Meanwhile, survey data from the Kaiser Family Foundation reveal that the average annual premium for family coverage hit $15,073 in 2011, a 9 percent increase over 2010. And according to a survey conducted by the Mercer consultancy, employers expect the cost of health benefits to rise by 5 percent this year.

With all these data in the mix, it’s hard to see how the White House could crow about “keeping costs down and making health care more affordable.” Instead, Obamacare is driving up health costs for Americans today – and saddling the next generation with trillions of dollars in new health care liabilities.

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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