CMS Report:Obamacare to boost health care spending

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Politics,Beltway Confidential,Philip Klein

When President Obama began pushing national health care legislation in 2009, he argued that reform was needed to rein in the unsustainable growth in health care spending that was crippling the budgets of businesses, states and the federal government. But a new government actuarial study finds that as a result of the law, health care spending will be $478 billion higher over the next decade than it would have otherwise been had no law been passed.

Furthermore, as a result of the health care law, about 50 cents of every dollar of health care spending in the United States will be financed by government by 2021, according to the report from the actuary’s office at the Centers for Medicare and Medicaid Services, unveiled today in the journal Health Affairs.

Already, supporters of greater government involvement in the health care sector are touting the report. "It's delivering more coverage for the same dollars,” Austin Frakt, a professor at the Boston University School of Public Health, told the Huffington Post’s Jeffery Young.

Though it’s true the report does say that the law would cover 30 million more Americans, while adding 0.1 percent to average annual health care spending growth, judging the reform a success on this basis would be moving the goal posts that Obama set when he embarked on his health care crusade.    

“(T)he status quo is unsustainable,” Obama declared in a June 2009 speech to the American Medical Association. Yet under the law he championed, spending over the next decade is expected to actually exceed the status quo he viewed as unsustainable.

In the same AMA speech, Obama warned that, “If we fail to act, one out of every five dollars we earn will be spent on health care within a decade.” Yet the CMS report predicts that “health care spending as a percentage of GDP is projected to rise from 17.9 percent in 2010 to 19.6 percent by 2021” – in other words, roughly one in five dollars.

During the health care debate, we heard a lot of talk from Obama administration officials about how his policies would “bend the cost curve down.” But below is a CMS chart of the cost curve with (red line) and without (green line) Obamacare. Notice where the curve was in 2010 when the law was passed, how it spikes in 2014 when the law’s major provisions are implemented and where it ends up by 2021. What you see is an upward sloping cost curve.

Of course, even these projections, as CMS cautions,  “remain subject to substantial uncertainty given the variable nature of future economic trends and a lack of historical experience with many forthcoming health system reforms.” Also, the health care law’s expansion in health insurance coverage is supposed to be paid for by cutting spending growth of Medicare – if those changes don’t get implemented, costs will rise far higher.

The major takeaway, however, is that even if you assume those savings from changes to Medicare, Obamacare is still projected to fail at one of its central goals.  

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