Everybody knows the Affordable Care Act has been a massive, expensive failure, with prices and spending spiraling out of control.
We heard this on Wednesday, from Minnesota’s Democratic Gov. Mark Dayton: “The reality is the Affordable Care Act is no longer affordable.”
And earlier this month from Bill Clinton, who characterized Obamacare price hikes as “the craziest thing in the world.”
And of course from Donald Trump, in the second presidential debate: “Obamacare is a disaster. You know it. We all know it. It’s going up at numbers that nobody’s ever seen worldwide. Nobody’s ever seen numbers like this for health care.”
It’s true that nobody’s ever seen (or, at least, not in a good long while) numbers like this for health care — because, in fact, the price increases have been so small.
The popular narrative that health-care prices and spending are growing at ludicrous speed is completely, utterly false. On nearly every metric, health care today is actually much cheaper than anyone predicted when Obamacare was signed into law.
I know, I know. Readers will call baloney because their own health-related costs have gotten so high.
Yes, they are expensive and, yes, they are growing. But the aim of the Affordable Care Act was never to make health-care prices fall; it was merely to prevent them from growing at the insane rates we saw in the decades before the law.
That’s what was meant by that famous limbo-tastic expressionof “bending the cost curve”: Policymakers were trying to restrain rapid health-care cost growth, not reverse it.
On that basis, today’s health-care system has exceeded expectations. Exactly how much credit Obamacare deserves for these achievements, though, remains an open question (more on this in a bit).
Since Obamacare passed, health prices have been rising at the slowest rate in 50 years, according to the Bureau of Economic Analysis’s index of health-related personal consumption expenditures. Year-over-year price increases have averaged about 1.6 percent each month since the law passed in March 2010. That’s roughly half the rates seen over the prior decade.
What about insurance premiums? They’re definitely not cheap, averaging more than $6,435 in 2016 for an employer-sponsored single-person plan, according to the Kaiser Family Foundation.
But again, what matters is the trend, and the counterfactual: Where would premiums be today had earlier, more rapid price-growth trends continued? These premiums rose on average “only” 2.9 percent in 2016, compared with an average annual increase of 7.1 percent in the decade leading up to Obamacare’s passage in 2010.
What about premiums for insurance bought on the troubled exchanges?
We didn’t really have a functional individual market before Obamacare, so there’s no useful trend to compare with. But we can at least compare today’s numbers with projections made when the law was being considered.
In late 2009, the Congressional Budget Office and the Joint Committee on Taxation forecast what individual insurance premiums would be under the law in 2016. Their best guess for the average nationwide benchmark plan (meaning, the second-lowest-cost “silver” plan): $5,200 for single coverage.
The actual cost came in well below that this year, at $4,583, according to a Kaiser Family Foundation analysis.
Likewise, total U.S. health-care spending, especially Medicare spending, today is much lower than projected. As a result, Medicare’s hospital insurance trust fund is expected to remain solvent until 2028, 11 years longer than anticipated before Obamacare was enacted.
None of these figures will be surprising or controversial to economists or health-care experts. What is uncertain, though, is who or what is responsible for the price and spending slowdown.
The Obama administration likes to take credit. And there indeed were cost-control measures in the ACA, but probably not enough of them to fully account for how much price growth decelerated. Moreover, other developed countries have also seen health spending decelerate, and even the U.S. slowdown began before Obamacare actually passed.
Given that we don’t exactly know what caused the slowdowns, it’s hard to predict whether they’ll continue. There are some worrying signs that they may not, including: hospital and provider consolidation; reduced competition among insurers (especially on the exchanges); delayed implementation of the “Cadillac tax” on high-cost insurance; and recent approval of expensive, potentially blockbuster drugs.
But in the meantime, those claims that Obamacare would destroy the economy and send health-care prices through the roof? So far that dog hasn’t barked.