Krugman: Obamacare’s Secret Success

Paul Krugman gets into the weeds to show how Obamcare is saving money.  The rate of increase in medical costs has really slowed down, in keeping with the law’s official title: The Patient Protection and Affordable Care Act.

…many, though by no means all, of the cost-control measures have already kicked in. Has the curve been bent?

The answer, amazingly, is yes. In fact, the slowdown in health costs has been dramatic…

Since 2010, when the act was passed, real health spending per capita — that is, total spending adjusted for overall inflation and population growth — has risen less than a third as rapidly as its long-term average. Real spending per Medicare recipient hasn’t risen at all; real spending per Medicaid beneficiary has actually fallen slightly…

Here are some of the reasons why costs are tamping down:

…existing drugs go off-patent and can be replaced with cheaper generic brands. This is a real phenomenon; it is, in fact, the main reason the Medicare drug program has ended up costing less than originally projected…

So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act’s reduction in Medicare “overpayments” — mainly a reduction in the subsidies to private insurers offering Medicare Advantage Plans, but also cuts in some provider payments. A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patients end up being readmitted soon after being released — an indicator of poor care — and readmission rates have, in fact, fallen substantially. Medicare is also encouraging a shift from fee-for-service, in which doctors and hospitals get paid by the procedure, to “accountable care,” in which health organizations get rewarded for overall success in improving care while controlling costs.

Furthermore, there’s evidence that Medicare savings “spill over” to the rest of the health care system — that when Medicare manages to slow cost growth, private insurance gets cheaper, too.

And the biggest savings may be yet to come. The Independent Payment Advisory Board, a panel with the power to impose cost-saving measures (subject to Congressional overrides) if Medicare spending grows above target, hasn’t yet been established,

By: Alan

Alan Colmes is the publisher of Liberaland.