An article published by Forbes claiming that Obamacare will increase health care costs by $7,450 for a typical family of four is spreading like wildfire across the internet, but causing eye rolls from economists across the country.
The estimate by author Chris Conover, an adjunct scholar at the American Enterprise Institute, comes from a Center for Medicare and Medicaid Services (CMS) report, which projects that national health care spending will increase once the uninsured begin enrolling in the law’s health care exchanges.
“By 2022, the ACA is projected to reduce the number of uninsured people by 30 million, add approximately 0.1 percentage-point to average annual health spending growth over the full projection period, and increase cumulative health spending by roughly $621 billion,” the report finds.
To translate that number to a “typical American family,” Conover took “the latest year-by-year projections, divided by the projected U.S. population to determine the added amount per person,” multiplied that result by four and voila: Obamacare will add $7,450 to average health spending for a family of four between 2014 and 2022!
One economist interviewed by ThinkProgress, the Center for Budget and Policy Priorities’ Paul Van de Water, described this calculation as one of the stupidest things he’s read in a long time and likened it to arguing that college costs will increase for a “typical” family if the federal government adopts policies that help lower-income Americans afford college education. Yes, the nation will spend more on education if more students enroll in colleges and universities, but the “typical” student already attending college won’t; she or he will continuing paying tuition at more or less the same rate, while the newly-enrolled student will presumably benefit from some sort of subsidized tuition rate.
The same is true here. The so-called “typical” family that Conover describes already receives health care insurance through their employer. The existence of 30 million newly-insured people — many of whom will receive tax credits if they purchase insurance in the law’s exchanges — won’t do much to move their premiums in one way or another. (Health advocates hope that the law will slow the rate of growth in health care spending, but that’s a long-term proposition.)
In fact, if anything, the CMS report that Conover links to shows that Obamacare is a good financial proposition. In 2022, total health care spending will increase by 1.5 percent, while the number of non-elderly adults with health care coverage will increase by 9 percent. That’s a pretty good deal any way you slice it.
Conover produces “an average that doesn’t mean anything for anyone,” Van de Water told ThinkProgress. “He understates the value of the coverage that uninsured will be getting, but greatly overstates and mis-states the cost that the typical family will experience. Typical is employer-sponsored insurance and that is not being affected to any significant extent.”
“This is a typically misleading use of data by opponents of Obamacare,” MIT’s Jonathan Gruber added. “The bottom line is that the government has consistently reported that Obamacare will raise national health spending by about 1 to 2 percent.” “This is a small fraction of the typical 5 to 7 percent annual growth rate in health care — and is a small price to pay for insuring 30 million or more Americans.”
Kenneth Thomas, Professor of Political Science at University of Missouri-St. Louis, rips apart Conover’s methodology and notes:
Forbes’ most-read story of the day (with over 26,000 Facebook shares and 3400 tweets as I write this) is simply false. Between all the new taxes and the premiums from the newly insured, you can cover the total increase in health care spending. The typical, already insured family isn’t going to see increases due to the rise in overall health care spending. You add 30 million new insured at a far lower cost than what we currently spend per person. And the editors didn’t catch a blatant error on present value.