This all suggests that the vast majority of the post-recession slowdown is attributable to lower economy-wide price inflation along with some temporary noncyclical factors. Of the surprisingly small amount left to be explained by the recession and structural changes, I would attribute the greatest share to the recession.
A patchwork of experiments across the country are trying to better manage these cases. The Center for Health Care Strategies, a policy center in New Jersey, has documented such efforts in 26 states. Some are run by private insurers and health care providers, while others are part of broader state overhaul efforts. The federal government is supporting some, too, through its $10 billion Innovation Center, set up under the Affordable Care Act.
Health care premiums are continuing to rise in 2015. While the pace of change has slowed since the dramatic increases of 2014, the savings promised under the Affordable Care Act (ACA) have still not materialized.
Measuring changes in premiums is an important element in understanding the impact of the ACA. In previous analysis, The Heritage Foundation determined that the new regulations and benefit mandates put in place through the ACA caused premiums to increase drastically in 2014, with average premiums increasing more than 50 percent in some states. This Issue Brief examines premium changes in 2015 and finds continued but slower premium growth, indicative of a market going through a sorting process.
The Congressional Budget Office’s new report shows updated cost projections for the insurance coverage expansion in the Affordable Care Act. With the debate over the ACA remaining so intensely polarized, advocates moved aggressively to spin this routine update as reflecting favorably on the law. A front-page article in the Washington Post referred to the new findings as showing “savings,” quoting a supporter as saying, “I can’t see how people can continue to say . . . that Obamacare had no cost containment in it.” Such comments in the wake of CBO’s update are flawed interpretations of the new estimates and what they signify. The following explains what CBO has actually projected: basically that the ACA will do less to expand coverage than previously estimated.
On March 9, the Congressional Budget Office unveiled its updated budget projections for the years 2015 to 2025, including significant changes to its outlook for Obamacare’s spending and coverage estimates. The CBO now thinks that 8 million fewer U.S. residents will gain coverage from the health law, compared to its original estimates. But the CBO also significantly underestimated the impact of competition on Obamacare’s private insurance premiums. This begs the question: could competition among private insurers solve America’s debt crisis?
This unsustainable spending growth occurs because we continue to increase spending on Social Security, Medicare, Medicaid, and now on the massive expansion of federal health spending embodied in the Affordable Care Act. Growth in these four categories of federal entitlement spending accounts for our whole fiscal imbalance.
These data suggest a fairly simple story: health care spending is rising because the economy is recovering and providing incomes that permit households and businesses to spend more on everything, including health care. In addition, the ACA itself is designed to makes sure that those receiving Medicaid or health insurance subsidies spend more on health care. The data certainly do not support the notion that the ACA itself has “bent the cost curve.”
Why does this matter? First, health care spending is rising faster than Gross Domestic Product (GDP). That means the gap between costs (health care spending) and resources (GDP) — called the “excess cost growth” — is widening. It is now 1.8 percent, up from -0.4 percent in 2012. This suggests that the recent decline in excess cost growth is much like the 4 years in the 1990s — transitory and likely to go away. Second, sustained excess cost growth fuels spending in federal health programs, and exacerbates the already-threatening projections for federal debt. Finally, the rising share of health spending in GDP — now 17.8 percent is a fundamental metric of “affordability.” Put simply, the ACA standard of affordable insurance — 9.5 percent — cannot possibly be met by all Americans simultaneously if the total bill is nearly twice that. Instead, affordability for some comes by shifting the cost to someone else.