A year ago, disaster was looming for the Affordable Care Act. But today, the complex law also known as Obamacare is mounting a comeback.
Several new sources of data suggest the law is helping keep a lid on medical expenses, something no other effort has managed to pull off for 25 years. Meanwhile, several calamities predicted by critics have failed to materialize. Employers aren’t dumping health insurance, premiums aren’t soaring and thuggish federal agents aren’t hunting down citizens who fail to comply with the law.
Cost containment may be most significant development. The ACA includes many provisions meant to discourage the overuse of tests, procedures and other types of care while also giving practitioners incentives to rein in costs. Plus, health insurance coverage for more people ought to increase the use of cost-effective preventive care while reducing the incidence of emergency room visits and other costly ways of dealing with health problems when you don’t have insurance.
It appears to be working. Since 2010 — the year the ACA went info effect — the Congressional Budget Office has reduced its estimate of spending per Medicare beneficiary by more than $1,000 per year. That adds up to $70 billion in savings per year, for a decade — a hefty sum, even by Washington standards. Medicare and Obamacare are two different programs, but the ACA included provisions meant to cut back on federal Medicare spending. That has happened and appears likely to last.
Separate research conducted by the Centers for Medicare and Medicaid Services predicts a slowdown in how quickly medical costs will rise in the future. That’s not as dramatic as an actual decline in medical costs, but it’s better than the prior trend of skyrocketing costs year after year. From 1990 to 2008, healthcare costs grew by 7.2% per year, on average. Through 2023 they’re now forecast to grow by 5.7% per year. The same aspects of the ACA that help explain Medicare savings probably account for the overall improvement in healthcare costs.
The last bit of good news of Obamacare and its backers involves expected premiums for 2015. In its first analysis of insurance company rate filings for next year, the nonprofit Kaiser Family Foundation has found that the premium for a mid-tier plan will fall by 0.8% in 2015. Price changes will vary considerably by state and region, with premiums in Nashville rising by 9%, for instance, while those in Denver fall by 15%, according to the initial numbers. On average, it’s not a huge savings for the typical family, but it does defy predictions of painful spikes in the cost of coverage under Obamacare.
The controversial health law still faces many challenges, including weak public support. Cost savings might not last, and the swell of baby boomers flooding into retirement virtually guarantees overall health costs will continue rising at an unsustainable pace, absent much deeper reforms. And it’s still not clear how the government will collect penalty payments for people who refuse to comply with the new requirement to get insurance.
The next enrollment period, which begins on Nov. 15, could be just as rocky as last year’s rollout — and that comes not from an Obamacare scare-mongerer but from the government executive, Kevin Counihan, who’s now running Healthcare.gov. Hackers cracked into the site recently, raising new concerns in addition to familiar technical problems. Instead of last year’s six-month enrollment period, this year’s will last just three months, leaving less time to sort out problems. Since the most eager enrollees probably signed up the first year, prompting the next batch of uninsured Americans to sign up could be a much tougher sell.
Beyond that, the Affordable Care Act isn’t even clear of legal challenges yet. One case winding through the courts, Halwig v. Burwell, contends that a technicality ought to invalidate subsidies for enrollees in many states, which would torpedo an essential plank of the law. A decision, likely in 2015, could be a huge setback for Obama’s signature legislative effort. The law could also run into trouble if Republicans capture both houses on Congress in this year’s midterm elections — or the presidency in 2016. Obama should enjoy the absence of bad news while he can.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.