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    Original, essential content from OMTEC. Industry leaders Michael Butler, Dirk Kuyper and Mike Matson discuss the intricacies of supplier relationships within the orthopaedic industry.
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  • Hospitals want patients to pay in advance October 17, 2014
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Medicare Actuary: Obamacare Will Triple the Growth Rate of Net Insurance Costs

Medicare Actuary: Obamacare Will Triple the Growth Rate of Net Insurance Costs

Ralph Note: Any thinking person knew this, which is why they had to rush it through before anyone read it and figured it out. That’s why it was a 2,700 page bill, because it would take longer to figure it out. This is typical of politics. I’m so tired of all of the back room deals. What have the got to hide?

WASHINGTON - JANUARY 26:  Richard Foster, chie...Medicare Actuary Richard Foster. Image by Getty Images via @daylife.

Remember when the President promised that Obamacare would reduce the cost of health insurance? “Under [our] plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year,” said Obama in 2008. The law, like Romneycare in Massachusetts, would magically eliminate the mythical “free-rider problem” by massively subsidizing health spending for the lower middle class.

Well, the Office of the Actuary in the Centers for Medicare and Medicaid Services recently put out its annual projections of national health care spending. And, contrary to the President, the actuaries find that Obamacare will dramatically increase the near-term growth rate of health care costs. In 2014, the actuaries find that growth in the net cost of health insurance will increase by nearly 14 percent, compared to 3.5% if PPACA had never passed. The growth rate of private insurance costs will rise to 9.4 percent, from 5.0 percent under prior law: an 88% increase.

Here is a chart that the Office of the Actuary published in the July 2011 issue of Health Affairs. The blue bars represent the Office’s projected spending growth under prior law, and the red bars represent the growth under Obamacare:

The Office of the Actuary does project that growth in private premiums will moderate a bit after 2014, but for reasons the Obama administration won’t like, given its recent harassment of McKinsey & Co.:

For 2015–20, growth in private health insurance premiums is expected to slow somewhat and average 5.6 percent annually. Underlying this expectation is that some employers of low-wage workers will stop offering health coverage (and many of their employees will move to the exchange plans, while others move into Medicaid or become uninsured).

There is another provision of PPACA that the Office of the Actuary believes will help reduce health spending: the “Cadillac tax” on high-cost insurance plans, which comes into effect in 2018. As I’ve written many times, a law that solely consisted of equalizing the tax treatment of employer-sponsored and individually-purchased health plans would have done more for health reform than the entirety of Obamacare.

Unfortunately, that’s not how it played out. Instead, we doubled down on a failed system of subsidies, mandates, and controls. Encouraging more health spending is not the way to curb its growth. As P.J. O’Rourke memorably put it in 1993, “If you think health care is expensive now, wait until you see what it costs when it’s free.”

UPDATE: In the comments below, rz00 and ritacornymichael plausibly argue that I am eliding the difference between overall insurance costs and per-capita insurance costs.

 

 

 

 

 

 

 



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