If only it were true that the Patient Protection and Affordable Care Act, (Obamacare,) lowered overall health care spending by paying for the quality of care, as opposed to the quantity of care, as we have been told, our health care system would in fact be more efficient.
In 2001 and 2002, national health care spending rose nearly 10% each year. The following years it began to drop, and by 2008 it had been cut in half. One could argue that spending on health care was significantly reduced during the Bush administration, well before Obamacare. In fact, health care spending continued to stabilize during the first two years of the Obama administration, increases in the 4% range, again before the ACA became the law of the land in March of 2010.
So why has America been spending less on health care since the highs of 2001-02? The deep recession, beginning in 2007, is the main culprit. But in 2003 government health care spending started to drop, four years before the recession, so what major change occurred during this time to reflect such a drop in spending? The answer… HSA’s. Health Savings Accounts were offered to employees at this time, and in 2003 over 1 million people were enrolled in an HSA. Today that number is 17 million. Give the patient an incentive to shop for the best care at the best price, something an HSA accomplishes, with the added incentive to save for retirement tax-free, and health care spending will drop.
Another claim by PPACA proponents is that the law has lowered health care spending, thanks to the delivery system reform included in the legislation. Basically, this portion of the law states that if Medicare doctors and hospitals work together and lower costs below the typical federal reimbursement rate, the government will split the savings with the providers. The CBO calculated that, at best, these reforms will lower federal health care spending by a fraction of one percent, ($5 billion out of $6.4 trillion spent on health care over ten years.) To say that this aspect of the law is already bending the cost curve down in ludicrous.
Far more consequential are the cuts to Medicare included in the law that have lowered federal health care spending. One of the largest Medicare cuts is known as the “productivity adjustment factor,” Hospitals now receive lower reimbursement payments from the government to cover inflation rates each year. This equates to 1% each year, and the compounding effect will be large numbers of hospitals refusing to accept Medicare patients. 1% may not seem like much, but when your margins are in the 1%-4% range, it won’t be long before losing money on Medicare patients is the norm. To make up the shortfall, hospitals and doctors are now charging the private insurers more to see their members, which in turn increases premiums that much more.