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Topics: Obamacare

Don't credit Obamacare for slower growth of health care costs

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Opinion,David Freddoso,Columnists,Obamacare,Health Care,MinusRelatedPhoto

In November, the White House declared early victory in Obamacare's war against rising health care costs. With the help of Paul Krugman and other sympathetic writers, officials excitedly publicized that the average annual inflation-adjusted increase in national health spending since 2010 has been significantly lower than the historic average since 1965.


On Monday, the Centers for Medicare and Medicaid Services released its new annual report on national health expenditures, finally updating its data with numbers for 2012. Looking back to 2000, it shows that the annual rise in U.S. health care costs, not adjusted for inflation, has been declining steadily since 2002, long before Obamacare. The “good news,” apparently, is that this rate of increase, even if it is no longer falling, has remained a bit below 4 percent since 2009.

The timing alone should discourage any attempts to credit Obamacare. Even the current era of slower, steadier growth began in 2009, when the law was still just a politician's bad idea. In 2010, no provisions of Obamacare took effect until late September, and no major provisions combating cost increases took effect at all.

Things get a little more interesting if you turn to page 30 of the new CMS report. That's where you find inflation-adjusted health care spending for each year going back to 2003 -- the metric the White House was crowing about in November.


What these data show now is that when adjusted for inflation, health care costs accelerated in 2012 for the second year running, and by quite a bit more than they had the year before. The yearly increase in health spending remains quite small – an inflation-adjusted 2 percent – but nearly twice what it was at its bottom in 2010.

In short, these results don't quite tell the story the White House wanted.

It's hard to understand exactly what Team Obama was expecting. As health insurance expert Robert Laszewski has pointed out, Obamacare meddles quite a bit with insurance prices (and it's mostly made them higher), but when it comes to health care costs -- the actual amounts that patients, insurers and the government pay for care -- there's very little in Obamacare to rein them in. And most of what is there doesn't take effect until this year or next.

The strongest case for Obamacare's role in keeping costs steady relates to its new penalties against hospitals that re-admit too many Medicare patients. The penalties reduced re-admissions by 130,000 between January 2012 and August 2013, the White House claims. And that's great -- but it's only an annualized 2 to 3 percent of Medicare readmissions (CMS estimates 2.6 million in all), and that becomes a mere rounding error in Medicare's overall hospital spending -- which, by the way, still grew faster in 2012 than it did in the two previous years, due to increased enrollment.

In its haste to display signs of success, Team Obama is failing to manage the expectations game. Obamacare supporter and health care economist Jonathan Gruber provided a much more sober and realistic approach in his recent discussion with the Washington Post's Sarah Kliff. “The law isn't designed to save money,” he said. “It's designed to improve health, and that's going to cost money.”

If only they'd told us that at the beginning!

Still, it would be a mistake to confuse correlation with causation. Perhaps real health care costs accelerated upward modestly in each of the two years after Obamacare, but it doesn't necessarily follow that the law is to blame.

DAVID FREDDOSO, a Washington Examiner columnist, is the former Editorial Page Editor for the Examiner and the New York Times-bestselling author of "Spin Masters: How the Media Ignored the Real News and Helped Re-elect Barack Obama." He has also written two other books, "The Case Against Barack Obama" (2008) and "Gangster Government" (2011).
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