“Health care inflation has gone down every single year since the law [the Affordable Care Act] passed, so that we now have the lowest increase in health care costs in 50 years–which is saving us about $180 billion in reduced overall costs to the federal government and in the Medicare program.”
— President Obama, news conference, Nov. 5, 2014
In his post-election news conference, President Obama hit on a theme that we have explored before — that the Affordable Care Act has led to lower increases in health care costs. But the evidence for this is still rather fuzzy.
Let’s deconstruct the president’s statement.
First, note that the president simply notes that growth in health-care spending has gone down every year since the law passed, thus cleverly avoiding a causal connection. But he certainly implies it, and that’s the message most viewers might have received.
But as we have said, the evidence for a direct connection is fuzzy — and certainly in dispute. The White House earlier this year touted a report by the Office of the Actuary at the Centers for Medicare and Medicaid Services as showing slow health-care spending growth continued in 2013. But here’s how the actuaries actually worded their assessment:
“Health spending growth for 2013 is projected to have remained slow at 3.6 percent due to the modest economic recovery, the impacts of sequestration and continued slow growth in the utilization of Medicare services, and continued increases in cost-sharing requirements for the privately insured.”
Note that there is little mention of the impact of the Affordable Care Act on the data. In fact, despite the president’s claim of a decrease of every year, the White House’s own chart shows that the 2013 estimate represents a slight uptick from 2012, when adjusted for inflation and population. As the White House report puts it, “the three years since 2010 will have recorded the three slowest health-care spending growth rates since record keeping began in 1960.” That is impressive, but it is not the same as health costs going down “every single year” since the law was passed in 2010.
Here’s the White House chart:
On top of that, the actuaries estimated that expected growth in 2014 would be 5.6 percent — obviously an increase from 3.6 percent — because “9 million Americans are projected to gain health insurance coverage, predominantly through Medicaid or the Health Insurance Marketplaces.”
Thus, even if Obama’s claim of continuing year-after-year declines in heath care inflation were correct, that track record will likely end this year — because of the Affordable Care Act. Now, to be fair, the long-term impact of the law on health-care inflation remains uncertain. Analysts can only speculate. But in the near term, the law is expected to increase health-care costs, according to an analysis cited by the White House.
“In context, it is clear that the president’s core point is that the last three years have seen historically slow health care cost growth,” a White House official said. “As shown in the graph you included, 2011, 2012, and 2013 saw slower growth in real per capita national health expenditures than 2010 or any prior year stretching back five decades. The sentence you asked about below does not change the core point of the claim.”
The president gets even more specific in the second part of his statement — that $180 billion is being saved in the Medicare program. We realize he was speaking extemporaneously at a news conference, but he’s using too much shorthand here. He is referring to a Congressional Budget Office projection for the year 2020, not currently, and this is a combined figure for both Medicare and Medicaid, which totals $188 billion. (In speeches, the president has rendered the statistic correctly.)
In 2020, the CBO report shows, the decrease for Medicare alone would be $120 billion. Obama talks about the $180 billion as if it is current savings, but in the 2014 fiscal year, the estimated savings is just $60 billion.
Moreover, the impact of the Affordable Care Act on these Medicare numbers is also murky. A recent report that appeared on the blog of the journal Health Affairs found that more than 60 percent of the slowdown in Medicare costs since 2011 stems from reduced estimates of spending on Medicare Part D, the prescription drug program created under President George W. Bush. Much of that savings appears to be the result of the fact that many blockbuster drugs have lost patent protection and thus face competition from less expensive generic drugs. The report said that such savings likely would be fleeting.
In any case, that savings on prescription drugs has little to do with the Affordable Care Act. Over a 10-year period between 2012 and 2022, the analysis said, the total savings to the core parts of Medicare that pay for hospitals, doctors and other providers (Parts A and B) amounted to $145 billion, with the reason for three-quarters of those potential reductions still subject to speculation.
The Pinocchio Test
To recap, at the news conference, the president bungled a pair of talking points in service of what some may regard as a tendentious claim — that the Affordable Care Act has already resulted in a decline in the growth of health-care spending.
There is no dispute that health care spending is growing at its lowest level since the 1960s, but the impact of the Affordable Care Act is still uncertain. The White House has issued reports making its case, which have been disputed by others. There are certainly some cost-controls contained in the law, but it remains unclear whether those measures have really had that much impact, especially because the Great Recession clearly had affected health-care inflation even before the law was implemented. Just as growth in health-care costs have slowed because the 2009 economic crisis, so has economic growth and general price inflation overall.
When making a claim like this, the president needs to get his statistics right. He is trying to say that Obamacare is responsible for the slowdown in health-care costs, without directly saying so. But he should acknowledge that although the overall trend is positive, the impact of his health-care law remains unclear. Uttering this claim without any caveats is going too far, even when making allowances for the fact he is speaking extemporaneously. The president earns Three Pinocchios.
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