Source from Annie Lowrey, The New York Times
Over the next few years, the government is expected to spend billions of dollars less than originally projected on the law, analysts said, with both the Medicaid expansion and the subsidies for private insurance plans ending up less expensive than anticipated.
Economists broadly agree that the sluggish economy remains the main reason that health spending has grown so slowly for the last half-decade. From 2007 to 2010, per-capita health care spending rose just 1.8 percent annually. Since then, the annual increase has slowed even further, to 1.3 percent. A decade ago, spending was growing at roughly 5 percent a year.
But even though the Affordable Care Act might be more a beneficiary of changes in health care spending than the primary driver of them, the law’s provisions to control costs could prove increasingly important as the economy improves, demand for health care increases and spending picks back up.
“It was a trend that was happening; we noticed that trend; we took advantage of that trend,” said Jason L. Furman, the chairman of the White House’s Council of Economic Advisers. “Some of it was the Affordable Care Act catching up with the private sector, and some of it was pushing the private sector forward.”
Administration officials have pointed to falling hospital readmission rates as one strong sign that cost-control provisions in the Affordable Care Act are working. Also, they noted that a growing number of insurers and health care providers are agreeing to contracts that pay for the quality of care, rather than the quantity, another indication that the law’s encouragement on that front is starting to pay dividends.
But those are responsible for only a tiny portion of the slowing rise of health care costs; other changes, like rising deductibles and copays that discourage some people from seeking extra services, play a bigger role, analysts say. Still, the Kaiser Family Foundation, a nonprofit research group, estimates that the weak economy accounts for as much as three-quarters of the slowdown in the growth of spending on health care.
But even if only about a quarter of the savings is because of noneconomic factors, said Larry Levitt, a top official at the Kaiser Family Foundation, “that’s real change in the health system.”
Critics, however, say they see little evidence that the law will lead to significant cost savings.
“These claims are just as groundless as the ones that misled so many Americans to believe they would be able to keep their previous coverage,” argued Charles Blahous, a former Bush administration official now at the Mercatus Center at George Mason University.
To be sure, the Affordable Care Act will lead to a drastic bump in health spending by the government starting next year, with an estimated nine million Americans signing up for Medicaid and perhaps as many as seven million buying a subsidized health plan through the government exchanges. But economists expect the underlying rate of spending growth to remain low.
And whatever the reasons for the slower growth, taxpayers appear set to reap some benefits.
Already, the Congressional Budget Office has quietly erased hundreds of billions of dollars from its projections. It now estimates that Medicare spending in 2020 will be $137 billion lower than it thought in 2010, a drop of 15 percent; Medicaid spending will be $85 billion, or 16 percent, lower; and private health insurance premiums are expected to be about 9 percent lower.
Some economists say they believe that the Congressional Budget Office might be underestimating the long-term effect of the slowdown, because it expects that spending growth will eventually return to its previous trend line. David M. Cutler, a Harvard economist and former Obama adviser, cautiously suggests that the slower growth might stick around, and if so the savings for the government might be a whopping $750 billion over 10 years, he says.
Whether such improvements will last depends on whether private firms — nudged along by Washington — create and retain incentives to keep spending low.
“In the past five decades, there are only two periods when we’ve been able to sustain low excess health care cost growth for an extended period,” Mr. Levitt, of the Kaiser foundation, said, referring to the current trend and a period in the 1990s, when the Clinton administration tried and failed at overhauling the health care system. “There was a sense in the system: ‘Something is coming, and we need to get ready for it.’ ”