Employer Health Coverage Cheaper Than Government Programs — But Obamacare Will Explode Costs

Sarah Hurtubise | Reporter

Private employers pay drastically less for health coverage per person than the government, but Obamacare will likely shift more Americans to government health care services and boost health care costs in the future, according to a Monday report from the American Health Policy Institute.

For a variety of reasons, federal and state spending on health care is 166 percent higher per person than private employers’ spending per person, the report from former deputy secretary of Health and Human Services and current American Health Policy Institute president Tevi Troy and AHPI chief economist D. Mark Wilson found.

Between state and federal programs — Medicaid, Medicare and military health care — governments spent $9,130 per person cared for in 2012 — a whopping $1.1 trillion on health care for 119 million people.

Employers, on the other hand, spent just $578.6 billion on 169 million people, for a much lower $3,430 per person. Some of the disparity is due to the health of the patients — Medicare, with the sickest population, has by far the highest per-person costs of any program at $10,830 per covered person in 2012.

But even when the health of the patients is taken into account, a disparity between private and public health care spending clearly remains. For one, there’s the eyewatering costs of fraud and improper payments in government health care programs. In 2012, the Government Accountability Office estimated that in 2011, $64.8 billion of Medicare and Medicaid payments were wrong. Private employers with private insurance have far more incentive to tamp down on improper payments.

And government spending on health care is getting worse, overall. Medicaid is the only government program to shrink its cost per person over the past decade, Troy and Wilson found, but Medicaid largely did so by cutting physician reimbursements and shifting costs to Medicare instead. The repercussions of Medicaid cuts are felt the most by patients who struggle to even find a doctor who will take their so-called coverage.

Medicaid’s improper payments tacked on an additional $392 per person in 2011, largely by paying for those who were ineligible for the program. Obamacare will likely make this part of the problem much worse — the vast Medicaid expansion which has now been accepted by 26 state and the District of Columbia will likely up the cost of improper Medicaid spending as well.

And while employers provide health care more efficiently than government programs, Obamacare is drastically hiking the cost of doing so. From the employer mandate to costly taxes that hit large employers hardest, the cost of providing health coverage is rising dramatically for businesses and they’ll likely respond by cutting services. (RELATED: Report: Obamacare will cost large employers over $5k per employee)

“In all, it seems that the ACA, by intent or just in effect, will be driving more people from employer-based health care into government-based programs,” the report concluded. “If government policies move people from programs that cost less per individual to ones that cost more per individual, that could mean that we will be spending even more on health care than currently anticipated over the next decade.” 

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