In a study released in January, the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) reported growth in national health-care spending of 3.7 percent for 2012, the fourth consecutive year of slow growth. Touting the results in a Wall Street Journal op-ed, Jason Furman, chairman of the White House Council of Economic Advisors, attributed the slow spending growth to the passage of the Affordable Care Act, also known as Obamacare. But Furman failed to explain how the slowing growth in health-care costs that began in 2008-09 could be attributed to a statute passed in 2010, and whose major provisions did not go into effect until 2014. And he failed to mention that the CMS authors attributed the slowdown in health spending to the recession (the study reported that the passage of Obamacare had only a minimal impact on health-care costs). Thats quite an omission, but its consistent with the administrations approach to news about Obamacare: Its always good, even when its bad.
Now, the White House is celebrating a report from the Commerce Departments Bureau of Economic Analysis that GDP rose just 0.1 percent during the first quarter of 2014. Were it not for increased spending on health care—which added 1.1 percent to the GDP—the change would actually have been negative. The BEA attributed this grim report to a downturn in exports, declines in business and inventory investments, and a decline in consumer spending. Rather than address the faltering economy, the administration again seized the opportunity to hype the ACA. People who didnt have insurance before can now go to the hospital and the doctor, Furman said. Thats good for the economy. Furman projected that increased health-care spending will create a tailwind for the economy for the next two years.
As more people gain insurance and use their new coverage, health-care costs will naturally rise. But one of the ACAs selling points was that it would save people money—it is the Affordable Care Act, after all. Many of the laws programs that were supposed to decrease costs have been withdrawn, are inoperative, or are not delivering as promised. The long-term care program—a.k.a. the CLASS act—was abandoned by the administration and ultimately repealed. The Independent Payment Advisory Board (IPAB), envisioned as a 15-member panel that would recommend ways to reduce Medicare spending, has yet to appoint a single member. The Accountable Care Organizations (ACO)—networks of doctors and hospitals that are supposed reap savings by coordinating medical care for patients—are off to an inauspicious start, with many groups withdrawing from the program because of an inability to generate savings.
What will increased health-care spending under the ACA get us? The results of the much-noted Oregon Medicaid-expansion study are instructive—and discouraging. Those who gained Medicaid coverage reported higher utilization of services and much higher medical expenditures but little or no improvement in health outcomes. Since more than half the people gaining coverage under the ACA are doing so via Medicaid and it remains unclear how many people will gain private insurance—no one knows how many health-care exchange enrollees have actually paid for their insurance or were previously uninsured—we can expect that the benefits of increased spending on health care, if any, will be modest.
Never fear, however. Somehow, some way, the administration will reassure us that this is all a good thing.