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Right Turn
Posted at 03:56 PM ET, 06/13/2012

Obamacare won’t bend the cost curve

The U.S. Centers for Medicare and Medicaid Services reported this week that the current lull in health-care spending (due to the recession) will end in 2014 and spending would increase thereafter “if most of the federal health-care overhaul takes effect in 2014. After that, the rate would drop, but spending still would grow at a higher rate than that of the past few years.” It isn’t a coincidence that 2014 is the year when Obamacare, if it survives supreme Court review, would kick in. The Wall Street Journal reports:

Spending would jump 7.4% in 2014 when the health-care law is scheduled to be fully implemented, the analysts predict, as millions of Americans gain coverage through subsidized insurance plans purchased through government-run exchanges or through Medicaid, the federal-state program for low-income people. . . .

It isn’t surprising to those who understood all along that Obamacare was not going to “bend the cost curve downward” as liberals claimed. James Capretta of the Ethics and Public Policy Center, and former associate director of the Office of Management and Budget, e-mailed me: “The president sold Obamacare by saying it would cover everyone, cut premiums, and solve the cost problem. No one believed him, of course, and for good reason. The law is a massive entitlement expansion, paid for with higher taxes and dubious Medicare cuts.” He concluded, “There’s no reason to think it will do anything except exacerbate our cost problems. The latest projections from the government – put together by economists and actuaries who essentially work for the president — confirm that Obamacare adds to costs, not reduce them.”

When I spoke to Rep. Paul Ryan (R-Wis.)today, he told me the cost uptick was predictable. “Obamacare further distances the patient and consumer from the price and results of their health care.” In the Obamacare scheme, the 15-person Independent Payment Advisory Board will be standing by to cut cost by the only mechanism available: limiting or denying care.

Moreover, the real figures are probably worse than the Centers for Medicare and Medicaid Services numbers. As Capretta noted, “These projections assume all of the cuts in Medicare contained in Obamacare will be implemented, which they won’t.”

Whether or not the Supreme Court strikes down Obamacare, there are important lessons to be gleaned from this trial run for top-down medical care. First, if you make consumers less aware of the actual cost of their health care (or worse, have others pay for it) they will use more of it. Second, after increasing use and expenditures for health care (by among other things, mandating a very expensive type of health-care coverage), the only mechanism to reduce cost is to ration care. (Otherwise the spending spiral goes up and up.) If you don’t like that scheme, the alternative — which conservatives recommend — is to try to use the purchasing power of millions of Americans to foster competition on service, price and quality.

Liberals say that despite the experience of Medicare Part D, this won’t work. But we know Obama’s plan isn’t designed to reduce cost, just cut care when health-care expenditures escalate. Maybe we should try something different, whatever the Supreme Court decides.

By  |  03:56 PM ET, 06/13/2012

 
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