The lies of Obamacare — bending the cost curve

One of the supposed benefits of Obamacare was that, somehow, it would “bend the cost curve” for health care cost — in other words, slow the rate of growth of these costs. Just how providing subsidized health care to millions would accomplish this feat was never clear. But the claim, nonetheless, was part of the sales pitch.

The claim has persisted since Obamacare was enacted. Supporters note that lately health spending has been growing no faster than spending on other goods or services. And President Obama touts the fact that “under [Obamacare], real Medicare costs per person have nearly stopped growing.”

How a law that is only now being implemented could have affected health care costs during the past few years is not clear. In reality, the slowing of Medicare costs is likely due to the mass influx of comparatively young, comparatively healthy geezers (the baby boomers) into the system.

As for health care costs generally, most economists attribute the “bent” cost curve, which predates the passage of Obamacare, primarily to the impact of the recession. As the New York Times explains, the more that workers lost their jobs and health coverage, the less their families spent on health care.

But now, employment is rising steadily (albeit slowly). Thus, the New York Times reports that health care costs are surging:

“Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system,” Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a statement. . . .

The annual pace of spending growth on health care increasing to 5.6 percent in the fourth quarter of 2013, from 1.3 percent in the first quarter. That 5.6 percent growth rate is the highest since 2004. . . .

Many. . .analysts said they had long expected health spending to increase. “If we are seeing an uptick, it’s the beginning of the uptick,” said Drew Altman, the president of the Henry J. Kaiser Family Foundation. “We’ve expected to see a lagged effect, both when the economy declines and when it improves.”

The uptick that began in 2013 can be expected to continue, and probably accelerate, as (1) millions of previously uninsured Americans (how many millions remains to be seen) obtain health insurance as a result of Obamacare and (2) previously insured Americans are forced to replace catastrophic-type plans with plans that cover virtually everything.

Both of these developments will mean more visits to doctors’ offices, more hospital stays, and more purchases of prescription medication. In some cases, the spending will be beneficial to the patient; in others, it will be wasteful. In all instances, it will contribute to higher health care costs.

The adverse impact of Obamacare on the “cost curve” was foreseeable. Economist Douglas Holt-Eakin told the Times:

This is a criticism I’ve had of [Obamacare] going back years — this is not revisionist history. I thought it was too heavy on the insurance expansion and too light on delivery-system reform. It has tons of projects and demonstrations. But the road to hell is paved with projects and demonstrations.

What will “hell” look like? The Times warns:

Economists from both the right and left — including in the White House — have said that there is no greater threat to the government’s budget than soaring health spending. Rising insurance premiums would increase the cost of the health law’s expansion.

More broadly, experts have warned that the excess growth of health costs could increase the country’s debt and crowd out spending on all other priorities, including education, infrastructure, research and development and support for low-income families.

In the end, Obamacare is likely to bend the cost curve, but in the wrong direction. And with potentially disastrous consequences.

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