The health-care law’s success story: Slowing down medical costs
By David Cutler, WashPost, Published: November 8
David Cutler is a professor of economics at Harvard University and was senior health-care adviser to Barack Obama’s 2008 presidential campaign.
The anger over the botched rollout of the Affordable Care Act’s federal health insurance exchange — and over the conflicting explanations about whether people can keep their coverage — has been bipartisan and well-deserved. The administration needs to make personnel and management changes to get enrollment back on track. But the focus on insurance coverage obscures other parts of the ACA that are working well, even better than expected. It is increasingly clear that the cost curve is bending, and the ACA is a significant part of the reason.
The law has two overarching goals: Cover almost everyone, and slow the growth of medical care costs. The goals are equally important. Too little coverage, and premiums in the exchanges will be unaffordable; too rapid a cost increase, and the federal government will not be able to afford the subsidies.
Even as coverage efforts are sputtering, success on the cost front is becoming more noticeable. Since 2010, the average rate of health-care cost increases has been less than half the average in the prior 40 years. The first wave of the cost slowdown emerged just after the recession and was attributed to the economic hangover. Three years later, the economy is growing, and costs show no sign of rising. Something deeper is at work.
The Affordable Care Act is a key to the underlying change. Starting in 2010, the ACA lowered the annual increases that Medicare pays to hospitals, home health agencies and private insurance plans. Together, these account for 5 percent of the post-2010 cost slowdown. Medicare payment changes always provoke fears — in this case, that private plans would flee the program and that the quality of care in hospitals would suffer. Neither of these fears has materialized, however. Enrollment in private plans is up since the ACA changes.
(More here.)
David Cutler is a professor of economics at Harvard University and was senior health-care adviser to Barack Obama’s 2008 presidential campaign.
The anger over the botched rollout of the Affordable Care Act’s federal health insurance exchange — and over the conflicting explanations about whether people can keep their coverage — has been bipartisan and well-deserved. The administration needs to make personnel and management changes to get enrollment back on track. But the focus on insurance coverage obscures other parts of the ACA that are working well, even better than expected. It is increasingly clear that the cost curve is bending, and the ACA is a significant part of the reason.
The law has two overarching goals: Cover almost everyone, and slow the growth of medical care costs. The goals are equally important. Too little coverage, and premiums in the exchanges will be unaffordable; too rapid a cost increase, and the federal government will not be able to afford the subsidies.
Even as coverage efforts are sputtering, success on the cost front is becoming more noticeable. Since 2010, the average rate of health-care cost increases has been less than half the average in the prior 40 years. The first wave of the cost slowdown emerged just after the recession and was attributed to the economic hangover. Three years later, the economy is growing, and costs show no sign of rising. Something deeper is at work.
The Affordable Care Act is a key to the underlying change. Starting in 2010, the ACA lowered the annual increases that Medicare pays to hospitals, home health agencies and private insurance plans. Together, these account for 5 percent of the post-2010 cost slowdown. Medicare payment changes always provoke fears — in this case, that private plans would flee the program and that the quality of care in hospitals would suffer. Neither of these fears has materialized, however. Enrollment in private plans is up since the ACA changes.
(More here.)
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