ObamaCare Fails to Bend Cost Curve

 

In a recent post on broken ObamaCare promises (ObamaCare’s Sixth Anniversary – A Look Back – Part II), I mentioned one of those was bending the cost curve down. Now comes further evidence of that failure from the Centers for Medicare and Medicaid Services (CMS).

Chris Conover, Duke University economist who writes for Forbes, reminds us that President Obama said of ObamaCare, “Every single good idea to bend the cost curve and start actually reducing health care costs is in this bill.” With such a glowing endorsement of ObamaCare’s ability to lower healthcare costs, you would think this was a certainty.

Historical Trends

The rate of growth of healthcare spending was actually declining from 2000 to 2008 before ObamaCare. According to the Center for Medicare and Medicaid Services (CMS) the growth of healthcare spending was 9.7% in 2002 and declining steadily to 3.9% in 2009. This decline is attributed to the growth of Health Savings Accounts (HSAs) and the passage of The Medicare Modernization Act of 2003, which created Medicare Advantage plans and the Medicare Part D prescription drug benefit.

Since 2010, when ObamaCare was passed, the rate of growth of healthcare spending has increased again. In 2014 healthcare spending grew 5.3% after the first full year of the implementation of ObamaCare. CMS in 2016 projects it will continue to grow at an average rate of 5.8% from 2014 to 2024.

Conover used the CMS data to construct the historical pattern of healthcare spending and projections from 1960 through 2024. His data is revealed in the graph below:

Cost Curve Analysis

Conover concedes there is a slight flattening of the curve that began in 2009 and continued through 2013, when healthcare spending was at 17.3% of GDP. But this was before the implementation of ObamaCare in 2014. We can clearly see the upward swing of the curve that begins in 2014 and continues upward through 2024.

The real data for the years 2016 through 2024 are not in yet but the rate of rise of healthcare spending continues to outstrip the grow of GDP and inflation. By the Obama administration’s own CMS projections this trend will not slow down in the first ten years of ObamaCare. There is little doubt among honest observers that ObamaCare has failed to “bend the cost curve” and in fact has probably exacerbated the problem.

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