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ObamaCare Bending Up the Cost Curve

During his press conference on Friday, Jake Tapper, ABC’s excellent senior White House correspondent, asked President Obama about a new CMS (Centers for Medicare and Medicaid Services) report that shows that the health-care cost curve is actually bending up — not down, as during the health-care debate Obama had promised it would. In response, Obama said this:

With respect to health care, what I said during the debate is the same thing I’m saying now and it’s the same thing I will say three or four years from now. Bending the cost curve on health care is hard to do. We’ve got hundreds of thousands of providers and doctors and systems and insurers. And what we did was we took every idea out there about how to reduce or at least slow the costs of health care over time.

But I said at the time, it wasn’t going to happen tomorrow, it wasn’t going to happen next year. It took us decades to get into a position where our health care costs were going up 6, 7, 10 percent a year. And so our goal is to slowly bring down those costs. … I haven’t read the entire study. Maybe you have. But if you — if what — the reports are true, what they’re saying is, is that as a consequence of us getting 30 million additional people health care, at the margins that’s going to increase our costs, we knew that. We didn’t think that we were going to cover 30 million people for free, but that the long-term trend in terms of how much the average family is going to be paying for health insurance is going to be improved as a consequence of health care.

And so our goal on health care is, if we can get, instead of health care costs going up 6 percent a year, it’s going up at the level of inflation, maybe just slightly above inflation, we’ve made huge progress.

The president should read the report, which can be found here. It incorporates the effects of health-care reform and estimates annual spending growth to be 0.2 percentage points higher than its February 2010 estimate, increasing from 6.1 percent to 6.3 percent. According to the Wall Street Journal, “The report by federal number-crunchers casts fresh doubt on Democrats’ argument that the health-care law would curb the sharp increase in costs over the long term.”

In 2009, the report reads, national health-care spending, public and private, totaled $2.5 trillion and accounted for 17.3 percent of the economy. The report predicts that health-care spending will rise to $4.6 trillion and account for 19.6 percent of the economy in 2019. By contrast, in February — before the passage of ObamaCare — the same team of government experts, using the same economic and demographic assumptions, predicted that national health-care spending would reach $4.5 trillion, or 19.3 percent of the gross domestic product, in 2019. The report also anticipates a big increase in health-care spending in 2014, when major provisions of the new law, including a requirement for most Americans to have insurance, take effect. From 2013 to 2014, for example, overall health-care spending is expected to increase by 9.2 percent, which is significantly more than the 6.6 percent increase predicted before ObamaCare became law. (For more, see this story.)

Beyond that, the report assumes that the law’s sweeping reduction in Medicare payments to doctors — 30 percent over the next three years — will actually take place. As Grace-Marie Turner points out, “Congress will not let payment rates be reduced to these levels, so health spending will increase further.”

And former CBO director Douglas Holtz-Eakin has written a paper arguing that ObamaCare provides strong incentives for employers to drop employer-sponsored health insurance for as many as 35 million Americans, funneling far more workers into taxpayer-funded health insurance, thereby raising the gross taxpayer cost of the subsidies by roughly $1.4 trillion in the first 10 years.

A core promise of the president’s signature legislative achievement, then, has been exposed as false. And for Obama, in light of the CMS report, to be talking about the cost of health care going up at or just above the level of inflation, which is running below 2 percent this year, is utterly fanciful. Moreover, the American people can be excused if during the health-care debate they didn’t pick up Obama’s warning that “bending the cost curve on health care is hard to do” and that he knew ObamaCare would increase costs in the short run. Those warnings were omitted, for example, in the president’s September 10, 2009 health-care speech to Congress, when Obama claimed that his plan “will slow the growth of health-care costs for our families, our businesses, and our government.” Obama even pointed out that “if we are able to slow the growth of health-care costs by just one-tenth of one percent each year, it will actually reduce the deficit by $4 trillion over the long term.” To reiterate: the new CMS report predicts an annual increase by two-tenths of one percent each year over the status quo — even accepting the Obama administration’s own ludicrously optimistic assumptions. The reality will be a good deal worse than the CMS report anticipates.

This is all of a piece. Claim after claim the president has made — on the stimulus package, on unemployment, on the deficit and the debt, on the “recovery summer,” on ObamaCare, and on so much more — is being shattered by events. The expectations he set were extraordinarily high and his performance so far is inept. That is one reason why Obama and his party will suffer enormous electoral losses seven weeks from now.


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