Obamacare Playing Important Role In Slowdown Of Rise In Healthcare Costs

It is not the only factor, but it’s an important one. Healthcare costs always rise, but the rate of growth is being stunted, in no small part thanks to the imminent implementation of the Affordable Care Act. Drew Altman at Politico:

Experts debate how much of the slowdown is due to the weak economy, which causes people to use less health care, and how much is due to changes in health insurance and the health-care system, such as higher cost-sharing or new efforts to limit avoidable tests or hospital days. But the consensus – including the actuaries – is that both factors are playing some role.

What is far less clear is how much Obamacare may also be contributing to the slowdown in costs. Proponents of the law say it is helping to control costs because the cost- containment provisions of the law are working as advertised. These include new limits on how much insurance companies can charge for administration and profits (with rebates to consumers if they charge too much), and state review of rates proposed by insurance companies.

There is solid evidence that these provisions are working as intended, but they mainly apply to the individual and small group markets, just a small slice of the overall health care marketplace. Obamacare also reduced the rate of increase in future payments to providers for Medicare. These reductions are projected to take more than $700 billion out of health spending over the next 10 years, but they haven’t had much effect yet. Other provisions of the law, such as the Medicare experiments in payment and delivery, are still just getting started. Critics of Obamacare, of course, dispute that the law is having any effect on costs because, well, there is basically nothing they like about Obamacare.

Even though its direct effects on system-wide costs may be limited so far, I believe Obamacare is having a significant indirect effect, although cause and effect and the magnitude are hard to prove. (As the actuaries rightly point out, insuring more people will boost the rate of spending growth temporarily, but the effect should be small and short-lived.)

By: Alan

Alan Colmes is the publisher of Liberaland.