Paying for Obamacare

We passed it. We're finding out what's in it. And now we have to pay for it.



From the earliest days of Barack Obama's presidency, much of the debate about the Patient Protection and Affordable Care Act—the health care law known as Obamacare—has revolved around questions of cost.

Would the law reduce the cost of typical family health insurance premiums? Would it reduce the federal budget deficit? Would it slow the unsustainable growth of national health spending? The law's backers initially insisted that it would do all three, and over time took to arguing that its positive effects were already visible. But as the law settles into place, the pretense that the Affordable Care Act actually makes health care more affordable is increasingly difficult to sustain.

For most people, affordability is about one thing: health insurance premiums. President Obama's campaign-trail promise that the law would reduce average family premiums by about $2,500 has obviously not come true, but Obamacare's backers say it is a success on this front anyway. That's because average premiums have come in lower than the Congressional Budget Office projected.

That may be comforting to liberal wonks, but it's doubtful that most people's first—or last—instinct when looking at new health insurance rates is to compare them to the CBO's old scores. A November 2013 analysis of individual market rates under the law by Avik Roy of Forbes and the Manhattan Institute suggests that the majority of states have seen premium hikes under the law. Insurance industry sources have already warned that in many states, rates next year will be far higher still. A Morgan Stanley survey this month of health insurance brokers finds double-digit increases in both the small group and individual markets, with some states seeing outsized spikes. The report says that the "increases are largely due to changes under [Obamacare]."

Lower than expected rates may be partially a temporary benefit of the start-up process, with insurers posting artificially low premiums in order to gain customers up front, especially in heavily populated states. If so, then premium spikes will eventually have to follow; pocketbook-friendly below-cost rates won't be sustainable in the long run.

The law's system of health insurance subsidies will offset some of the increase. But given how common cost concerns already seem to be amongst those choosing to remain uninsured, it seems unlikely that they will fully insulate lower-income individuals from higher premium costs. 

The $2 trillion worth of public spending the law calls for will inevitably have an impact on federal finances as well. The law's supporters have long argued that its deficit impact would be positive, pointing to a CBO score that calculates a net deficit reduction once all the law's new taxes and spending cuts are factored in. But several of those revenue mechanisms have already proven troublesome: the CLASS (Community Living Assistance Services and Supports) Act, a long-term care program that was to be the source of a significant portion of the law's officially scored deficit reduction, was shut down when it was revealed that it would not be self-sustaining, as required by law. Medicare Advantage cuts intended to offset the law's spending have not gone into effect.

Even ignoring the loss of these offsets, the law's deficit effects were never as positive as the law's backers claimed. As Charles Blahous, a Mercatus Center scholar and one of Medicare's public trustees, has repeatedly argued, the CBO's score was an artifact of the budget office's scoring conventions. Obamacare, he says, "unambiguously adds to federal deficits in that it authorizes more additional spending than it generates in additional tax revenues."

Finally, there is the issue of total national health spending. This is less a matter of what Obamacare is doing as what it is not doing: The law was pitched as a cost-control system designed to hold the growth of health care spending in check through a series of innovative health care delivery reforms. And for the last few years, liberals have argued that this is exactly what it has done. Health spending growth has flattened since 2009, and Obamacare's backers, as well as Obama himself, have been keen to credit the health law for at least some of the effect.

But now there are signs that health spending may be growing again. At the end of last year, just as Obamacare's coverage expansion was coming online, health care cost growth began to grow once more—growth that has continued into this year, and now represents the fastest pace in seven years. Health spending data from the federal Bureau of Economic Analysis shows recent spending levels to be growing the fastest since 2004.

This merely points in the direction of what more sober analysts already suspected: that the slowdown in spending was a temporary lull caused largely by the recession in combination with preexisting changes in how employers are financing care. Spending growth had been slowing for almost a decade before Obamacare passed. Much evidence suggested that Obamacare's various delivery system reforms would not be effective on a large scale.

Now that Obamacare's coverage expansion has begun providing the means for more people to access health services, and the worst effects of the recession are winding down, people will begin to spend more on health care once again. 

Because so much of the federal budget is tied up in health care spending, a return to growth would have disastrous effects on the country's future fiscal health. This would have been true without Obamacare, of course; future federal health spending commitments were unsustainable before the law and remain so now. But with the health law in place, layered on top of the already byzantine old system, meaningful reforms will be even more difficult to achieve. Obamacare has not only added to the nation's already unaffordable health care tab, it has further narrowed the ways in which we might pay for it. Now that we've passed it, we not only have to figure out what's in it, we have to figure out how to pay for it, too. 

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  1. Forget the “you can keep your Doctor” line, that was one was bad enough.

    I’m waiting for him to get called out on the “Your premiums will drop on average $2500 per family” lie. That one to me was way more blatant and persuasive. And yet at the time everyone believed it despite zero evidence to back up the claim itself.

    1. Tman can’t you find some other fake scandal to whine about ?

      The debate on Obamacare is over. Just like manmade global warming the issue is settled.

      Obamacare is the law of the land, debate settled, issue over.

      Forward !

      1. NO it’s not over, particularly since O Bumbler by his ACTIONS says it’s NOT OVER.
        NO Corporate MANDATES, NO Small Business exchanges, No mandates for companies between 50-100 employees, O BumblerCare is TOO EXPENSIVE = Waiver construed to be a HARDSHIP by HHS etc. etc

        The GREATEST portion of this abomination is yet to hit the pocketbooks of Corporations AND the Individuals who will be paying HIGHER rates.

      2. obamacare isn’t even implemented yet. So the debate is not over no matter how much societal mooches wish otherwise.

    2. Well, my premiums increased over $2500 a year because of this outrageous law. Adding 10 mandated benefits to healthcare DOES NOT decrease cost.

  2. But as the law settles into place, the pretense that the Affordable Care Act actually makes health care more affordable is increasingly difficult to sustain.

    Once in practice, all central planning pretenses are difficult to sustain.

  3. But with the health law in place, layered on top of the already byzantine old system, meaningful reforms will be even more difficult to achieve.


    1. Because it creates a whole new class of pressure groups, cronies, and dependents.

      Public choice, baby.

      1. I have yet to see anyone who benefits from this.

    2. Why?

      Agreed, for insurers this is true. For the Executive, re-writing policy became unprecedentedly easy. I’m sure accommodating all that whims… flexibility comes at zero cost.

  4. Interesting, Peter, that you admit that for the past few years spending on health care in the US has gone down, but (as you say) there are only “signs” that it MAY be going back up. Less emphasis on the facts, and more on the “signs.”

    But OK, signs then. Even in recent days, the prognostications of impending rate increases have been walked back.

    “The double-rate increases we’ve been hearing are probably exaggerated,” says Dave Axene, a fellow with the Society of Actuaries, adding that there would be wide variation across the country. “That’s not what we’re seeing from the actuarial organizations ? I guess we’re being a little bit more optimistic.”

    “Axene says…he expects an overall increase of 6% to 8.5%. He bases that on work he and others within the society have done with insurance clients. Before the Affordable Care Act, premiums rose an average of 7-10% a year.”


    Sounds like “signs” show a coming improvement, no?

    1. you admit that for the past few years spending on health care in the US has gone down,

      What Peter said:

      Health spending growth has flattened since 2009,

      I think you need either an eye exam or a remedial reading class.

      1. He’s got his propaganda, and he’s by-God gonna post it.

      2. The rate of spending increases has gone down, not flattened as Peter says.



        1. Rate of spending increase has gone down vs. health spending growth has flattened??? Both sound like “we’re not sucking as bad as we thought we would” to me.

        2. That’s the rate of increase in spending. Which I take to mean that spending is increasing, only at a slower rate.

          Healthcare costs have not gone down dramatically.

    2. The “effect” of OCare bending the cost curve pretty much disappear when you compare it to cost increases during similarly weak economies, BTW.

      After thorough analysis they identified that health spending fully responds to changes in the economy, indicating that the recession of 2007-2009 was the main factor that caused the slowdown.

      According to the report “about three-quarters (77%) of the recent decline in health spending growth can be explained by changes in the broader economy.”


    3. The idea that rates have flattened due to the ACA is absurd. None of the supposed cost savings measures have been around long enough to have an impact, especially since actuaries have to deal with the real world and not with overly optimistic political promises. Let’s just say that no one is cutting their ER budget under the grand assumption that all of these supposedly newly insured people will slow the rate of charity care cases using the ER as their primary care option.

      The “flattening” (reduction in growth) of rate increases is due to the recession and to measures put in by health care insurers and providers in reaction to, yes, unsustainable growth in costs. But those were things done prior to the ACA, and we won’t see the true impact of the ACA for a few more years.

      1. And just as those reductions in growth occurred in part due to a recession, some of the increase as well is due to coming out of the recession as well as the ACA putting more people into health care.

        1. Adding negative margin medicare patients to insurers by decree adds cost? Agreed.

          1. Er, medicaid. Damnit I keep doing that.

        2. coming out of the recession

          There are people who actually believe that something is “coming out of the recession”?

          We are currently on on Ron Paul Defcon Level 3. The fun is yet to start.

    4. I remember back when bad healthcare data from 2009-2013 or so couldn’t be blamed on Obamacare, because it hadn’t gone into effect yet.

      Suddenly, the flattening of insurance premiums immediately after the financial crisis is attributed to Obamacare.

      The socialist formula is always:
      1. Pass laws controlling people.
      2. Take credit for anything good that immediately follows (or predates) those laws.
      3. Blame anything bad on whatever freedom you’ve left for anyone.

      Being a socialist means never having to say you’re sorry.

    5. There is a BIG difference between Health Care Costs AND Health Insurance Costs!

    6. And you credit obamacare with a supposed decrease in spending before obamacare was implemented why? Please be specific. (snicker)

  5. By the way, Peter, in what year during the past 25 years or so did premiums ever go down? Here, no research needed.


    1. Exactly. We can file this under “Obama makes unrealistic promises about Obamacare.”

      1. I think you are right.

    2. Which year in the next 25 will premiums go down? Never. Never, ever, never. Best, most wildly optimistic scenario would be to bring rate increases down to just above inflation. And the only way that happens is if you hide costs within government subsidies.

      1. I agree. My point being that when you hear people screaming about the ACA increasing their premiums, the fact is their premiums have gone up each and every year for decades…even prior to the ACA.

        1. True enough, although it is reasonable to say that a significant portion of the increase is due to the minimum standards requirements of the ACA, to the increase in medicaid members, and to revisions to the estimates of relative age/healthiness of exchange plan members.

          1. And here’s the problem for Republicans, whoever gets the nomination (even, IMHO, Rand Paul). They will have to explain how they will still provide to Americans no denial for pre-existing conditions, no recission, no caps, and more without increasing those costs as well. Because even they now admit they need an alternative that still addresses these issues.

            1. Simple, take a lesson from Obama. Lie –

              “I promise that all pre-existing conditions will be covered, you can keep your doctor, a middle class family will save $5,000 a month more due to stuff, and a pony on your 5th birthday”

              I should be a politicians speech writer. It will help that now no standard for holding a politician accountable exists.

            2. Candidates on both sides could start with not conflating the cost of healthcare with the cost of insurance.

            3. Why? Fuck’em, its not the governments job

            4. Seems pretty simple. Offer to hold a national referendum on each item.

              “Would you like to help provide insurance to somebody that failed to insure himself until after he got sick? This will be very expensive. If the referendum passes, you will be assessed an automatic tax of $x/yr. Everyone will pay the same tax.

              __ Yes
              __ No”

              There is not a chance in he|| obama’s zoo animals would vote ‘Yes.’

        2. Premiums have gone up every year, but it went up like a rocket for some people under the ACA. And going uninsured or switching to cheaper plans is no longer an option.

  6. We’ve got printing presses… what’s the big deal? Just borrow some cash to pay for paper and ink!

    There’s always those rich folks. They don’t pay enough taxes.


  7. …”The law was pitched as a cost-control system designed to hold the growth of health care spending in check through a series of innovative health care delivery reforms. And for the last few years, liberals have argued that this is exactly what it has done.”…

    This is blatant bullshit. There is nothing in the law which controls cost at all and much that increases it.

  8. The Democrats’ Affordable Care Act is going the same direction as the Democrats’ Affordable Housing Acts of 1977, 1990, 1992. You remember, the Democrats’ master plan that created the largest financial meltdown in History? $40 trillion lost worldwide before the limited recovery we are still suffering through.

  9. The CBO numbers are bogus, IF my premiums today are $250/mo, then the CBO says “We estimate the FUTURE cost of a policy to be $1,000/mo.” and it turns out to be $500/mo, they say “The cost of Insurance Coverage is 50% LOWER than anticipated”.

    Great, MY ACTUAL cost went UP 100%, I don’t give a rat’s behind what they estimated, I care what it’s ACTUALLY costing me!

  10. We’ve been lied to for five years. Do you still believe the lies? I don’t.

    The foundational lies of obamacare:
    1. If you like your plan, you can keep your plan. Period.
    2. If you like your doctor, you can keep your doctor. Period.
    3. Premiums will go down $2500. Period.
    4. We will not add a dime to the deficit. Period.
    5. We have 7.1 newly insured citizens. Period.

    Remember to vote in November. The lies have to stop. Only we can stop them.

    If you don’t like the Democrat War on Healthcare, you don’t have to keep the Democrat War on Healthcare. Period.

    Let’s put a stop to the Democrats’ lies.

  11. And NOW THIS:
    “Without a fully built and operational system, federal officials can’t determine how many of the 8 million Obamacare sign-ups announced last week will have actually paid their premiums. They won’t even know how many enrollment attempts were never completed. That, in turn, could affect the amount of money the government spends on premium subsidies. And once the system finally does all come on-line, the data delays could force a sharp revision in that celebrated 8 million figure.
    Obama administration officials originally intended to have the major back-end components of HealthCare.gov working by the website’s launch in October. But the deadline slipped as officials focused their energy on the part of the website that consumers would use to enroll in coverage.
    When that front end failed disastrously on Oct. 1, the administration diverted every resource to fix it, further delaying the behind-the-scenes technical functions. The deadline for completing those pieces gave way to January and then to mid-March. Senior officials said early last month that they hoped to have the entire system ready by the summer. Now, even summer appears to be a question mark.”

    Read more: http://www.politico.com/story/…..z300sFdwao

  12. Excellent, Peter.

    I believe the ACA will cost us in another way: it may lessen our overall health.

    I realize that politics is often a matter of getting what you can when you can and in what form you can. But by bringing millions of more Americans into the healthcare system via Medicaid and government fiat while the cart is still before the horse, Obama is doing worse than ignoring his own 2009 warning that Medicaid is a “broken system” (https://www.youtube.com/watch?v=VK3wId8y3sU) when it comes to financial costs. He may also be writing a prescription for a mini-disaster when it comes to our nation’s overall health. Here’s why:

    “People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.” -From the book “SuperFreakonomics”


    “Chelsea Byers of Flagstaff is insured for the first time in her life through Healthcare.gov and couldn’t be more pleased. She might even go skiing for the first time, now that any injuries from an accident would be covered.” -Arizona Daily Sun, January 21, 2014 – http://azdailysun.com/news/loc…..f887a.html

    That in mind, see:

    “Obamacare: Making a bad situation worse” http://relevantmatters.wordpre…..ion-worse/

  13. Obamacare is an awful piece of legislation. The assumptions and cost projections were flawed to sell the program to a lot of stupid and gullible people. If you want to reduce health costs and improve quality, then increase competition and the supply. If people are not happy about their current insurance rates, wait until they meet their deductible before getting a dime back for their troubles. This pice of crap should be hung around the Democrat’s necks for decades. While there are a couple of good provisions in the act, it’s mostly a self-inflicted fiasco.

  14. the fact is their premiums have gone up each and every year for decades

  15. The whole Obamacare project as well as the legislation on it seems one big scam to me and I still know a lot of people, who rely on personal loans for emergency cases, but have not been insured yet.

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