It's official: Obamacare will increase health spending by $7,450 for a typical family of four

Article Highlights

  • In its first 10 years, Obamacare will boost health spending by roughly $621 billion above the amounts Americans would have spent

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  • The past is not prologue: the burden increases ten-fold in 2014

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  • In the interests of fair and honest reporting, perhaps it is time the mainstream media begin using “Affordable” Care Act

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It was one of candidate Obama’s most vivid and concrete campaign promises. Forget about high minded (some might say high sounding) but gauzy promises of hope and change. This candidate solemnly pledged on June 5, 2008: “In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year….. We’ll do it by the end of my first term as President of the United States.”  Unfortunately, the experts working for Medicare’s actuary have (yet again[1]) reported that in its first 10 years, Obamacare will boost health spending by “roughly $621 billion” above the amounts Americans would have spent without this misguided law.

What this means for a typical family of four

$621 billion is a pretty eye-glazing number. Most readers will find it easier to think about how this number translates to a typical American family—the very family candidate Obama promised would see $2,500 in annual savings as far as the eye could see. So I have taken the latest year-by-year projections, divided by the projected population and multiplied the result by 4. Simplistic? Maybe, but so too was the President’s campaign promise. And this approach allows us to see just how badly that promise fell short of the mark. Between 2014 and 2022, the increase in national health spending (which the Medicare actuaries specifically attribute to the law) amounts to $7,450 per family of 4.

Let us hope this family hasn’t already spent or borrowed the $22,500 in savings they might have expected over this same period had they taken candidate Obama’s promise at face value. In truth, no well-informed American ever should have believed this absurd promise. At the time, Factcheck.org charitably deemed this claim as “overly optimistic, misleading and, to some extent, contradicted by one of his own advisers.”  The Washington Post less charitably awarded it Two Pinocchios (“Significant omissions or exaggerations”). Yet rather than learn from his mistakes, President Obama on July 16, 2012 essentially doubled-down on his promise, assuring small business owners “your premiums will go down.” He made this assertion notwithstanding the fact that in three separate reports between April 2010 and June 2012, the Medicare actuaries had demonstrated that the ACA would increase health spending. To its credit, the Washington Post dutifullyawarded the 2012 claim Three Pinocchios (“Significant factual error and/or obvious contradictions.”)

The past is not prologue: The burden increases ten-fold in 2014

As it turns out, the average family of 4 has only had to face a relatively modest burden from Obamacare over the past four years—a little over $125. Unfortunately, this year’s average burden ($66) will be 10 times as large in 2014 when Obamacare kicks in for earnest. And it will rise for two years after that, after which it hit a steady-state level of just under $800 a year. Of course, all these figures are in nominal dollars. In terms of today’s purchasing power, this annual amount will rise steadily.

But what happened to the spending slowdown?

Some readers may recall that a few months ago, there were widespread reportsof a slow-down in health spending. Not surprisingly, the White House has been quick to claim credit for the slowdown in health spending documented in the health spending projections report, arguing that it “is good for families, jobs and the budget.”

On this blog, Avik Roy pointed out that a) since passage of Obamacare, U.S. health spending actually had risen faster than in OECD countries, whereas prior to the law, the opposite was true. Moreover, to the degree that U.S. health spending was slowing down relative to its own recent past, greater cost-sharing was likely to be the principal explanation. Medicare’s actuarial experts confirm that the lion’s share of the slowdown in health spending could be chalked up to slow growth in the economy and greater cost-sharing. As AEI scholar Jim Capretta pithily puts it:

“An important takeaway from these new projections is that the CMS Office of the Actuary finds no evidence to link the 2010 health care law to the recent slowdown in health care cost escalation. Indeed, the authors of the projections make it clear that the slowdown is not out of line with the historical link between health spending growth and economic conditions.”

In the interests of fair and honest reporting, perhaps it is time the mainstream media begin using “Affordable” Care Act whenever reference is made to this terribly misguided law. Anyone obviously is welcome to quarrel with the Medicare actuary about their numbers. I myself am hard-put to challenge their central conclusion: Obamacare will not save Americans one penny now or in the future. Perhaps the next time voters encounter a politician making such grandiose claims, they will learn to watch their wallet. Until then, let’s spare strapped Americans from having to find $657 in spare change between their couch cushions next year. Let’s delay this law for a year so that policymakers have time to fix the poorly designed Rube Goldberg device known as Obamacare. For a nation with the most complicated and expensive health system on the planet, making it even more complicated and even more expensive never was a good idea.

Footnotes

[1] The Medicare actuary first issued a report carefully estimating the cost impact of Obamacare on April 22, 2010. Its annual national health expenditure projections reports for 2010, 2011 and 2012 all have contained tabulations showing that Obamacare will increase health spending over the next 10 years compared to a counterfactual scenario in which the law was never enacted.

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Christopher J.
Conover

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