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The White House just released a report insinuating that administration policies, including the Affordable Care Act (ACA), had a major role in slowing the growth of health spending. The report emphasizes that health spending growth (on a per capita basis) in the last 3 years is the slowest on record: 1.3 percent a year, compared with 4.5 percent a year since 1965. Arguing that the administration had much to do with the slowdown is at best an exaggeration.
The spending trend has been slowing since 2002, well before Mr. Obama was elected president. There is considerable debate about what is causing the slowdown, but a law that was enacted in 2010 could not have much to do with it.
A major reason for the slower growth is the sharp recession in 2007-09, followed by the anemic recovery. The Kaiser Family Foundation estimates that 77 percent of the slower growth is due to the weak economy. Slower spending growth primarily due to a poor economy and high levels of joblessness is not a welcome trend.
Other analysts dispute the importance of a slow economy in reducing health spending growth. One can debate the numbers. One cannot debate that federal policy has not been successful in bringing the economy back to life.
The Congressional Budget Office attempted to discover what is causing the slowdown in Medicare spending, and essentially came up empty-handed. Without a clearer understanding of what is going on, it seems risky to assume that the slowdown will continue well into the future-and ill-advised to base policy on that assumption.
The President is clear that he will not consider any significant structural changes in the health entitlement programs. Today’s report backs that up. It claims that health spending is growing at an all-time low rate, and the ACA will wring inefficiency out of the health system.
Don’t count on it. The ACA paid for the trillion-dollar expansion of health subsidies through tax increases and cuts in Medicare payments to health care providers. Higher taxes distort economic decision-making and create inefficiency. “Productivity adjustments” that lower Medicare payment rates are required by the ACA whether or not hospitals and other providers actually increase productivity.
The fact is that Medicare continues to pay for medical care on a fee-for-service basis. If more services are provided, providers make more money. That is not the formula for promoting more efficient and appropriate use of medical care.
The ACA includes some innovations, such as accountable care organizations, that are supposed to improve health care delivery. But those are experimental-and the experiment is not going well. At this point, efficiency-inducing Medicare changes are more talk than reality.
A slower rate of growth does not mean Americans are spending less for health care. Costs are rising, just not as rapidly as in the past. A slower rate of growth also does not guarantee that we are getting better value for our money. The Administration’s report only confirms that the Obama administration is prepared to push off difficult but necessary reforms of our health entitlement programs to the next president.
Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute (AEI).
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