Here’s Evidence Obamacare Isn’t Lowering Healthcare Costs
It is becoming increasingly apparent that the Affordable Care Act — known colloquially as Obamacare — will not solve rising health insurance costs. Theoretically, it would seem that ensuring more Americans had access to health insurance coverage would mean that more people would forgo expensive emergency room care in favor of less-expensive appointments with doctors and nurse practitioners. This logic was often employed by those defending the healthcare reform while the legislation was being debated in 2009. But that reasoning was “sometimes a misleading motivator for the Affordable Care Act,” Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, told the Washington Post. “The law isn’t designed to save money. It’s designed to improve health, and that’s going to cost money.”
Hints that the Affordable Care Act would not be a motivator for lower healthcare costs came in the September release of a report published in the journal Health Affair. Actuaries for at the Centers for Medicare & Medicaid Services, or CMS, reasoned that while healthcare costs have indeed decreased in the past several years, there is no sign that the Affordable Care Act was responsible for drop in healthcare-related costs. Rather, the economic recession has been cited as the culprit, which seems reasonable given that costs are expected to jump 6.1 percent in 2014, the year the individual insurance mandate is implemented.
Yet, the Obama administration has told a different story. In his 2013 State of the Union Address, President Barack Obama proclaimed that, “Already, the Affordable Care Act is helping to slow the growth of healthcare costs” in the United States. “And the reforms I’m proposing go even further,” he continued. “We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital; they should be based on the quality of care that our seniors receive.”
Mirroring his words, Joanne Peters, a spokesperson for the Department of Health and Human Services told Bloomberg via a September email that the healthcare reform “holds insurers accountable for cost increases and encourages smarter care, two factors which are contributing to the slowdown of growth in costs. Already consumers have saved billions of dollars in premiums thanks to the rate review, medical-loss ratio provisions, and policies to promote quality and value in Medicare.”
It may be true that having health insurance does allow a patient to visit a primary care physician rather than the emergency room, or provide them access to preventive care so that a disease can be treated sooner. However, as healthcare economists argue, the basic laws of economics dictate that when the price of a good or a service is lowered, people typically consume more. “The overall notion is we’re getting people more health care,” Gruber added. As of January 1, around six million Americans who did not have health insurance in 2013 were covered, with 3.9 million newly insured thanks to the expansion in Medicaid in 25 states and the District of Columbia, and over 2.1 enrolled in private insurance plans through new federal and state websites. Those who now qualify for Medicaid earn less than 133 percent of the federal poverty line, which translates to about $15,000 for an individual and $31,400 for a family of four.
All states were originally mandated to expand their Medicaid programs, but a 2012 ruling by the Supreme Court determined that the mandated expansion of Medicaid was unconstitutional, finding that taking away all a state’s funds for its entire Medicaid program because it refused to make the expansion would be coercive.
A study conducted by Harvard University and published in the journal Science highlighted just how much an influence the expansion of Medicaid will have on healthcare costs. Researches analyzed data from the Oregon Medicaid study. In 2008, the state of Oregon found enough money in its budget to expand its Medicaid program to include an additional 10,000 low-income earners. But because more than 10,000 people wanted the coverage, the state was forced to use a lottery to determine who could go on Medicaid. That gave researchers an opportunity to study how health services consumption varied between those who were randomly assigned to receive health insurance and those who were not.
The Harvard study is not the first time the Oregon Medicaid expansion has been analyzed. Previous research found that those who enrolled in the public health program increased the number of hospital visits, primary care trips, and prescription drug use. The next question for researchers was weather Medicaid enrollees were using more healthcare services in general or whether they were visiting their primary care doctors more often. What the Harvard study determined was that without any financial restrictions, people used more health services, and as a result, increased the frequency of emergency room visits.
In Oregon, visits to the emergency room increased 40 percent. Plus, those covered by Medicaid made an average of 1.43 trips to the ER during the 18 months of the study, while those who were not chosen for coverage by the lottery system made an overage of 1.02 visits. Even more concerning, the data did not show any decline in the use of the emergency room for conditions treatable by a primary care physician.
This finding contradicts arguments made by Department of Health and Human Services Secretary Kathleen Sebelius when Congress was debating the reform in 2009. She cited the high number of uninsured Americans being seen at the emergency room as strong motivation to pass the law. “Our healthcare system has forced too many uninsured Americans to depend on the emergency room for the care they need,” she said in a July 2009 statement. “We cannot wait for reform that gives all Americans the high-quality, affordable care they need and helps prevent illnesses from turning into emergencies.”
Yet Gruber believes the Harvard study did not provide enough evidence against the expansion of Medicaid. “The overall notion is we’re getting people more health care,” he told the Post. “There are huge improvements in mental health. For those who want to argue that expanding Medicaid is a free lunch, this is bad. But that was never the right argument.”
More From Wall St. Cheat Sheet:
- Obamacare: Here’s What Happens Now
- Obamacare: Enrollment Numbers on the Rise
- Administration Prepares for the True Test of Obamacare
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