Last night on 60 Minutes, during a discussion about his new book on health reform, Steven Brill argued that while the Affordable Care Act has successfully enabled millions of uninsured Americans to sign up for health coverage, “we have no way in the world that we’re going to be able to pay for it.”
According to Brill, the ACA neglected to tackle the problem of rising health care costs, and taxpayers will be stuck paying the price. However, while he’s correct that there is much more work to be done on health care costs, the argument that the ACA did nothing of consequence on this issue is simply not accurate.
The ACA actually took a number of major steps that are helping to reduce costs, which is why the nonpartisan Congressional Budget Office (CBO) predicted that the law’s costs would be sustainable over the long-term.
For instance, the law included provisions to stop paying private Medicare Advantage plans more than traditional Medicare and to reduce Medicare payments to some health care providers. It imposed financial penalties on hospitals that make too many harmful mistakes or re-admit too many of their patients shortly after a hospital visit (often due to something going wrong with the original procedure). The structure of the ACA’s health insurance marketplaces was designed to encourage competition among insurers to keep premium costs low.
And in the next few years, the implementation of the Cadillac Tax on the priciest employer-based insurance plans — the enactment of which over labor union opposition is another example of the ACA taking on special interests — will help reduce private health spending. Though it hasn’t proven necessary yet due to lower-than-expected Medicare spending, the ACA also created the Independent Payment Advisory Board to make recommendations on Medicare payment changes if spending begins growing too quickly. And importantly, given that one of Brill’s primary critiques revolves around nonprofit hospitals charging excessive prices to uninsured patients, just yesterday The New York Times reported that the Obama administration had outlined strict new rules to prevent nonprofit hospitals from aggressively collecting exorbitant fees from low-income patients.
These policies are already paying off by saving money and improving patient care. Since 2010, the number of patients who acquired new infections or other harmful conditions in the hospital has fallen by 17 percent, saving an estimated 50,000 lives and $12 billion in health care costs. Similarly, the hospital readmission rate for Medicare patients has dropped from 19 percent to 17.5 percent, preventing 150,000 unnecessary hospitalizations in two years. Meanwhile, the number of insurers on the marketplaces increased by 25 percent this year, and the average growth in marketplace premiums from 2014 to 2015 was just 3.9 percent, compared to a 10.9 percent annual average from 2008 to 2010.
The ACA also established programs to test different models, including bundled payments, for shifting our health care system to pay for value rather than for the volume of medical services. The law enables health care providers to set up Accountable Care Organizations, providing incentives to more efficiently coordinate care to improve patient outcomes and reduce costs. Although still in the early stages, some of these pilot programs and ACOs are generating cost savings, and some health economists believe they may have led to a broader impact on health spending as many health care providers change their behavior in anticipation of such models expanding and becoming the norm. While it could be argued that more should have been done faster to implement new payment models, this is an issue with implementation, not with the law itself.
Plus, we’ve received a lot of good news on the health care cost front lately. After decades in which health care spending generally grew significantly faster each year than the rate of economic growth, health spending has slowed down dramatically. In 2013, the most recent year for which we have data, health spending grew at 3.6 percent, the lowest rate on record dating back to 1960. What’s more, health care costs measured as a percent of the overall economy, which is the more important measure, haven’t increased for five straight years.
Much of the slowdown can probably be attributed to the economic recession and its after effects, when many people who lost their jobs also lost their job-based health insurance. However, some analysts who have examined the recent trend believe that the ACA has also played a role — and even many analysts who see the economy or other factors to be the primary cause acknowledge that the ACA at least partially contributed to the slowdown.
On 60 Minutes, Brill dismisses the slowdown as more or less trivial since it represents a slower rate of increase, rather than an outright cut. But given that health spending accounts for almost one-fifth of the U.S. economy and is the largest driver of our long-term debt, slower increases still amount to very significant savings. Already due to the slowdown, U.S. health spending in 2019 is expected to be $500 billion less than was originally projected back in 2010. That’s nothing to sneeze at.
And perhaps most importantly, the amount that Medicare spends on each beneficiary is not just growing more slowly — it’s falling outright. When the Congressional Budget Office updated its long-term budget estimates in August 2014, it found that Medicare was spending $1,200 less per person in 2014 than it had predicted in 2009. Similarly, Medicare spending on hospital expenses per person has been falling each year since 2011. The CBO concluded that the slowdown in Medicare spending can’t be explained by the economic downturn, since Medicare beneficiaries’ usage of health care is relatively shielded from economic shocks. According to an analysis by the nonpartisan Kaiser Family Foundation, the majority of the Medicare spending slowdown is the combined result of ACA policies and the budget cuts from sequestration.
Of course, none of this means that our health care cost problems have all disappeared. If most of the non-Medicare health cost slowdown is indeed due to the recession, cost growth may revert to faster growth as the economy gains strength. We still spend twice as much per capita on health care than most other wealthy countries, without getting correspondingly better outcomes. And as Brill emphasizes, prices for prescription drugs, hospital stays, and other health care services tend to be much higher in the U.S. than in other countries. Clearly, we still have a lot of work to do to make health care spending more sustainable.
But at the same time, we shouldn’t downplay the progress we’ve made. The ACA is the most significant achievement for health care cost control in decades. It’s about time the law got a little credit for that.
Thomas Huelskoetter is the Research Assistant for Health Policy at the Center for American Progress.