The graphic above embodies the latest good-news story connected with the Affordable Care Act. It shows how projections of U.S. healthcare spending growth have come sharply down since Obamacare’s enactment in 2010. The latest projections are $2.6 trillion lower than the original post-ACA baseline forecast through 2020 — a reduction in projected spending of almost 13%.
This is known as “bending the cost curve”: Americans will be spending more in 2020 than they are now, but the rate of increase looks to be significantly slower than anyone expected. In raw numbers, the new expectation is that 2020 spending will come to about $4 trillion, compared to the $4.6 trillion projected at the time of the act’s enactment.
The graph and underlying statistics come from a new study by the Urban Institute, funded by the Robert Wood Johnson Foundation. The important question raised by the numbers is why spending is slowing. The study attributes much of the change, albeit an indeterminate portion, to the ACA.
That conforms to other new findings by the Gallup Organization, which has been tracking Americans’ medical well-being since 2008. In its latest report issued Monday, Gallup finds the smallest percentage of Americans reporting themselves unable to pay for needed healthcare — 15.5% — since it started measuring. The specific question was whether there were times in the previous 12 months when respondents didn’t have enough money to pay for healthcare or medicines they or their family needed.
Most of the drop has occurred since 2013, when individual insurance exchanges and Medicaid expansion were launched under the Affordable Care Act. Gallup finds a huge gap in Americans’ ability to handle big medical expenses between those with insurance (12.3%) and those without (41.8%).
The numbers also provide context for the latest so-called healthcare reform plan, to be unveiled by House Speaker Paul Ryan (R-Wisc.) Wednesday at the conservative American Enterprise Institute. Early indications from the institute are that this plan will be as nebulous as the GOP’s previous efforts to repeal and replace Obamacare. Ryan won’t be offering “legislative text or hard numbers,” institute health policy fellow Tom Miller told the news service Inside Health Policy, but is expected to call for “broadening use of health savings accounts and health reimbursement arrangements, selling insurance policies across state lines, capping the employer tax exclusion, keeping the guaranteed-issue mandate with exceptions, setting up high-risk pools for those with preexisting conditions,… and ending the individual mandate, among other ideas.”
Followers of the healthcare debate will recognize all those elements as standard features of GOP healthcare reform plans. Almost all would result in fewer Americans insured and higher rates, especially for vulnerable populations, according to an analysis by the progressive Center on Budget and Policy Priorities.
Previous Republican proposals have involved maintaining protection for people with preexisting conditions as long as they’ve maintained continuous coverage for 18 months or even three years. But lapses in coverage are not uncommon, especially among lower-income Americans, and often stem from job losses or other economic reversals.
Ryan himself has advocated turning over coverage for preexisting conditions to state-sponsored high-risk pools. As we’ve reported, this is a scam: high-risk pools have been tried before, and they almost always become ruinously expensive and doomed to fail.
That brings us back to the impact of the Affordable Care Act on U.S. healthcare costs. The Urban Institute study is cautious about the factors slowing the growth of spending. Among the acknowledged factors are the economic slump following the 2008 financial crisis and the 2011 sequester, which cut Medicare reimbursements by 2% across the board. Higher deductibles and other cost-sharing in ACA and employer plans also have had their effect in reducing healthcare utilization.
But the study points to several provisions of the ACA that almost certainly have influenced utilization and cost. Reductions in Medicare reimbursements may have prompted private insurers to hold the line on reimbursements for their enrollees. Medicare policies aimed at making hospitals perform more efficiently, such as penalties for hospitals with excessive readmission rates, have percolated across the entire healthcare landscape. Premiums for exchange plans, the study observes, “are below expectations because of strong competition, intense negotiations over provider payment rates, and narrow networks.”
It’s true that growth in overall healthcare spending ticked up during 2014, reaching 6.2% compared with average growth of less than 4% in 2008-2013, the study says. That was a hint that the slowdown had been the product of the poor economy. But signs have emerged that the spike “has already begun to dissipate.” That’s a sign that the increase resulted from the sudden addition of millions more Americans to the ranks of the insured, allowing them access to services that had been denied them previously.
Medicare and Medicaid officials say that by the last quarter of 2015, spending growth had dipped back below 5%. If that’s so, the Urban Institute report says, “spending projections will continue to fall and it will become harder not to attribute at least some of the sustained cost containment to the ACA.”