Ezekiel Emanuel is chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania and author of “Reinventing American Health Care.” He served in the Obama White House from 2009 to 2011. Bob Kocher, a partner at the venture capital firm Venrock, was special assistant to President Obama for health care and economic policy from 2009 to 2010.
“The Affordable Care Act, known as Obamacare, it is not affordable. Premiums have gone up. Deductibles have gone up. Co-pays have gone up. Prescriptions have gone up.” That is what one questioner stated in the second presidential debate. As if to highlight this complaint, the Obama administration has just announced that premiums in the both federal and state ACA exchanges will increase an average of 22 percent for 2017.
So the Affordable Care Act is a disaster, right? No.
Yes, insurance premiums are going up, both in the health-care exchanges and in the employer-based insurance market. In 2016, the average premium for family health insurance provided by employers was $18,142. That was an increase of $597 from 2015 and $1,308 from 2014. Similarly, the percentage of workers who had insurance with a deductible over $1,000 has risen, from 41 percent in 2014 to 46 percent in 2015 to 51 percent in 2016. And we all know that prescription drug prices are skyrocketing, growing 11 percent in 2014 and another 10 percent in 2015, well above general inflation and even health-care inflation. In particular, spending on specialty drugs — those expensive drugs for cancer, multiple sclerosis, hepatitis and rheumatoid arthritis — that are increasingly dominating the drug market was up more than 17 percent in 2015.
But here is the good news. While health-care costs and premiums are rising — the recent announcement notwithstanding — they are rising much more slowly than they did during the George W. Bush administration and, indeed, over the past 50 years. For instance, from 2001 to 2005, per-person health-care spending rose an average of more than 7 percent per year. More important, for ordinary Americans, employer-based health insurance premiums for a family increased by 54 percent between 2001 and 2005. Conversely, from 2011 to 2015, per-person costs rose an average of just 3.4 percent per year; family insurance premiums rose only 16 percent in that same time.
Another way to assess the ACA is to compare current premium costs with what costs were projected to be without the law. Recently, the nonpartisan Congressional Budget Office projected that under current law, premiums for employment-based coverage will be 10 to 15 percent lower in 2025 than they would have been without the ACA, assuming a tax on high-cost plans goes into effect. Similarly, the Brookings Institution estimated that in 2016, health insurance premiums in the ACA are at least 30 percent lower than they would have been for individuals without the ACA. And a Robert Wood Johnson Foundation-Urban Institute analysis found that national health-care spending is expected to be 11 percent — $2.6 trillion — lower from 2014 through 2019 than previously estimated by CBO.
True, premiums in the exchanges are on their way up, although in at least 12 states — including big ones such as California, Ohio, Michigan and New Jersey — the increases are 10 percent or less. Yet premiums also started out much lower than expected. With the increase, they are now at the level the CBO anticipated on passage of the ACA. Because subsidies are linked to the premiums — and 83 percent of people in the exchanges receive subsidies — for the ordinary American, the actual premium increase is almost zero. Indeed, 77 percent of Americans will find coverage for less than $100 per month. That is a great deal.
Importantly, the health-care savings extend beyond private insurance. Strikingly, from 2010 to 2014, spending in Medicare and Medicaid have actually declined by nearly 1 percent per person — saving state and federal governments, and thus taxpayers, significant billions of dollars.
So there has been a real slowdown in health-care costs compared with how they were trending. Certainly, not all of the decrease in spending is a result of the ACA. Some of it can be attributed to the Great Recession and changes in insurance design such as higher deductibles. But the continuation of this trend beyond the economic recovery suggests that a significant portion of the slowdown is because of the ACA.
The ACA also protected Americans from these higher deductibles by requiring insurers to cover preventive care — including three primary-care visits per year, flu shots, mammograms, colonoscopies and contraceptives — without deductibles or co-pays, and that should create future savings. In fact, the most recent available federal data on out-of-pocket spending found an increase of only 1.3 percent in total out-of-pocket spending in 2014. From 2010 to 2014, while average spending on annual deductibles rose by $131, average spending on co-pays fell by $67. At the same time health insurance is more valuable for most families.
It’s easy to understand why this is not the popular perception. Americans do not experience health-insurance premiums in comparison to the counterfactual of what they would have been, they experience them in comparison to what they were last year. They feel the pain, but their howls do not mean the law is a failure.
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