Does ObamaCare Reduce Health Care Spending?

Former Congressional Budget Office and Office of Management and Budget Director Peter Orszag recently claimed that the Patient Protection and Affordable Care Act of 2010 is an essential element to keeping future health care costs down. However, Orszag's claim amounts to little more than wishful thinking, says Veronique de Rugy, a Reason magazine columnist and an economist at the Mercatus Center.

Using Congressional Budget Office (CBO) data, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 have left the cost curve of federal health care spending virtually unchanged over the next 25 years.

  • The CBO finds that the effect of the health care legislation has been to increase government spending by $3.8 trillion between 2010 and 2020.
  • From 2020 to 2035, federal spending under the two projections are equal percentages of gross domestic product (GDP).
  • If Orszag is arguing that the real cost-containment provisions kick in around 2036, such futuristic projections are simply not worth taking seriously.

    The history of Medicare reimbursement rates demonstrates the fantasy at work in many official health care cost projections, including the CBO data seen above. It assumes that Medicare's sustainable growth rate mechanism, which would have reduced physician payments by 21 per cent in 2010 alone, actually takes effect. Medicare reimbursement rates are legislated to decline over time but basically never do. As Politico reported in May, "In 2010 alone, Congress has already headed off three scheduled payment drops – in January, March and April."

    ObamaCare doesn't reduce medical costs under even the rosiest of scenarios. What we can be certain of is that this legislation increases the amount of money taxpayers will be forced by law to pay for health insurance to the tune of $420 billion over the next 10 years. Despite the persistent claims of Peter Orszag and other defenders of the president's health care legislation, ObamaCare has nothing to do with cutting costs, says de Rugy.

    Source: Veronique de Rugy, Does ObamaCare Reduce Health Care Spending? November 4, 2010.

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    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 16 November 2010
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