Joel Hay: We can't afford Affordable Care Act

The Orange County Register

Published: March 29, 2013 Update

 

Obamacare's biggest selling point is that beginning next year all Americans will have a path to health care coverage. In fact, as Chief Justice Roberts upheld in a 5-4 vote at the Supreme Court last summer, after 2013, it will be illegal for any of us not to carry health insurance. Obamacare's biggest flaw is how expensive and wasteful it will be in accomplishing this expanded health care access.

 

The Affordable Care Act will add about 27 million Americans to the insured population and will likely increase government health care spending by more than $2.5 trillion over the next decade. Even the Congressional Budget Office estimates the 10-year Obamacare costs at $1.9 trillion through 2023, and this doesn't include any of the $300 billion annual health insurance premium tax exemptions that are crucial to ensuring that most private employers don't push all of their workers into the Obamacare Health Insurance Exchanges in 2014. It also doesn't include the $716 billion that was taken out of Medicare to help fund Obamacare without raising federal deficits.

 

This means that each newly added Obamacare beneficiary will cost the federal government about $100,000 to insure over the next 10 years. Only in Washington, D.C. could this even begin to sound logical or financially responsible. I'll bet that at least 95 percent of those who will get Obamacare coverage would rather just take the $100,000 than the Medicaid or Health Insurance Exchange health plans that federal and state bureaucrats are busily designing for them. For $100k, they'd gladly take their chances with the free care already provided by USC medical professors and residents at L.A. County Medical Center or other similar existing facilities.

 

Obamacare does nothing to deal with the 800-lb. health care gorilla – government programs cost too much. Medicare already has a $60 trillion unfunded liability for promises to future retirees. Just the spending for Obamacare, Medicaid and Medicare will raise deficits for the next 60 years to a level that will absorb over 20 percent of the entire economy, as much as the federal government spends on all its programs today. Actually, Obamacare does pay lip service to cost containment with a whole slew of new gobbledy-speak acronyms like ACOs (Accountable Care Organizations), PCMHs (Patient-Centered Medical Homes), EHRs (Electronic Health Records) and PCORI (Patient-Centered Outcomes Research Institute).

 

The problem is, while adding substantial administrative overhead costs, there is no evidence that any of these new bureaucratic contraptions will save any money.

 

The Obama stimulus spending pumped $30 billion into expanding electronic health records over the past four years and the consensus is that this has increased health care costs, not reduced them. As Stephen Soumerai from Harvard Medical School and Ross Koppel from the University of Pennsylvania wrote, "... The most rigorous studies to date contradict the widely broadcast claims that the national investment in health IT – some $1 trillion will be spent, by our estimate – will pay off in reducing medical costs."

 

All of the Patient-Centered Medical Home demonstrations done thus far have found that they significantly increase health care costs. Accountable Care Organizations, which are supposed to give physicians financial incentives to manage their patients better, have no mechanism to keep patients returning to them for care, and are thus as loophole-free as Swiss cheese. Even ACO proponents claim that in ideal circumstances ACOs will only slow the rate of growth of health care spending, not actually reduce it. And PCORI? PCORI is now spending billions of dollars to analyze health care services. This money is provided by a new Obamacare head tax on every health plan beneficiary. But there is a slight catch. Under Obamacare, it is illegal for PCORI to actually evaluate medical costs.

 

It could all have been done so much more simply by guaranteeing every American a catastrophic coverage health insurance plan that kicks in once their existing health benefit costs or annual out-of-pocket medical expenditures exceeded 15 percent of family income. By using existing health insurance premium tax expenditure loopholes to pay for it, taxes increases would have been unnecessary.

 

The Congressional Budget Office projects that at least 30 million people will still be uninsured in 2022, more than the 27 million that Obamacare adds to the covered roles.

 

But by then Democrats will be looking to pass Obamacare Part Deux, which will almost surely be single-payer health care for all. And when health care is free, you'll get what you pay for.

 

Joel W. Hay is a professor at the USC Schaeffer Center for Health Policy and Economics.