Democratic House Minority Leader Nancy Pelosi’s office claimed in a blog post last week that the Affordable Care Act (ACA), also known as Obamacare, has produced historically slow health care spending growth. “Since the ACA became law, health care costs have risen at the slowest rate in 50 years,” read the post.
Specifically, the Daily Caller News Foundation investigated her office’s claim that certain Obamacare reforms to Medicare have been “major contributors” to the slowdown.
In recent years, the U.S. has experienced the slowest rates of health care spending growth since the 1960s, which some economists have dubbed a “golden era” in slower cost growth.
But this trend began in 2002, long before the ACA. Some health experts believe Obamacare has meaningfully contributed to the slowdown, while others question its importance relative to other root causes. Regardless, it would be a “huge overstatement” to credit the majority of the slowdown to Obamacare, according to one expert.
The U.S. spent $3.2 trillion on health care in 2015, a figure that rises every year as prices climb, new medical products arrive on the market and demand for health care grows. Yet the rate of spending growth fell dramatically from 8.9 percent in 2003 to a low of 2.9 percent in 2013, prompting experts to debate the causes of the slowdown.
While the ACA increased national health spending with the enrollment of an estimated 20 million adults in health insurance, Obamacare advocates point to provisions in the law that lowered the per enrollee cost of Medicare. For example, the ACA switched to a more conservative formula to calculate Medicare payment rates to hospitals and other providers.
Pelosi’s office cited a 2016 report by the Council of Economic Advisers (CEA), a White House agency under the Obama administration, to argue the Medicare payment reforms were “major contributors” to slower health care spending growth.
“It’s not the entire explanation for why health care spending growth has been slower in recent years relative to the past,” Matt Fiedler, a fellow at the Brookings Institute and former CEA chief economist told TheDCNF. “But it is a meaningful contribution to that difference.”
The CEA estimated that lower Medicare payment rates have slowed health care cost growth by 0.5 percent per year.
“We can quantify the direct contribution, particularly of these price changes, but there’s a whole universe of additional effects that I think could be out there, but are difficult to pin down in a quantitative way,” Fiedler said. The effects include steps that Obamacare has taken to test more efficient payment models that aim to pay medical providers for value rather than volume.
Marc Goldwein, senior policy director for the non-partisan Committee for a Responsible Federal Budget, believes the ACA probably slowed Medicare cost growth, but was not the predominant driver of the economy-wide slowdown.
“I think it’s a huge overstatement, people who are pretending that Obamacare is really the driver of the slowdown,” Goldwein told TheDCNF. “I think there is some evidence to suggest that it might be one of the factors.”
Research by the non-partisan Kaiser Family Foundation (KFF) supports Goldwein’s assessment. The KFF found that 2014 Medicare costs were $126 billion lower than pre-ACA projections by the Congressional Budget Office (CBO), and it attributed $40 billion of the lower spending to Medicare payment reforms in the ACA.
“Obamacare does appear to have slowed cost growth at least in the Medicare space, you know, by definition,” said Goldwein. “And there’s a good argument that it’s had some effect outside of Medicare, but how large the effect is relative.”
Some research casts doubt on whether the ACA had a meaningful contribution to the economy-wide slowdown. One article found little evidence that Obamacare has been able to “bend the cost curve.” Other research estimated that Medicare payment reforms in the ACA only accounted for 5 percent of the total slowdown.
“At the end of the day, the Affordable Care Act was basically an insurance coverage expansion that had some very loose delivery system reforms that were more a first step than anything else,” Christopher Pope, a senior fellow at the right-leaning Manhattan Institute, told TheDCNF. “I think the delivery system reforms in the Affordable Care Act were a lot of hype.”
Health economists believe a number of factors have driven the spending slowdown, including the Great Recession, slower advancements in medical technology, sequestration cuts and what’s known as the “patent cliff” for prescription drugs.
“A lot of prescription drugs, which had been very costly in the last couple of decades – these have gone off patent and as generic alternatives have become available, the costs have just plummeted,” said Pope.
In addition, the creation of Medicare Part D, the prescription drug program in Medicare, has led to lower-than-expected costs for several reasons including the ability of plan sponsors to negotiate lower drug prices.
Pope also pointed to the rise in the number of high-deductible plans, which force consumers to be more sensitive to the cost of health care. Around a quarter of all workers are enrolled in a high-deductible plan, up from 4 percent in 2006.
Health experts disagree on what factors are the most important. “I think the jury’s still out on which of those are having a larger effect and which are having a smaller effect, but there’s not any research I’ve seen to suggest that just one of them is the overwhelming factor,” Goldwein said.
This uncertainty means that health economists aren’t sure the era of slower cost growth will continue. Factors like the economic recovery, new prescription drugs and technological advancements could each lead to accelerated cost growth.
“We know there’s some contribution from the ACA, but there’s lots we don’t understand,” said Fiedler. “It’s entirely possible that some of those factors are temporary and will bounce back.”
Health expenditures have predictably risen from 2.9 percent in 2013 to 5.8 percent in 2015 as millions of Americans signed up for Medicaid and health insurance through the Obamacare exchanges. But the Centers for Medicare and Medicaid Services (CMS) project the higher rate of growth will continue through 2025 at an average of 5.6 percent.
As far as whether Medicare payment rate reforms were “major contributors” to the current era of slower cost growth, Goldwein believes it depends on how you define “major.”
“I think if the claim is Obamacare is the reason for the slowdown, I think that’s probably false,” said Goldwein. “I think if the claim is that Obamacare is a factor in the slowdown, I think that is probably true.”
TheDCNF reached out to Pelosi’s office for clarification on her statement but did not receive a response. Given the disagreement among health experts about the impact of Obamacare on slower cost growth, we rate the claim as unsubstantiated.
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