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Did the Reform Law Lower Health Spending?

By June 7, 2017Commentary

The federal health reform law remains controversial as do attempts to deal with its patent defects.  Those who supported it continue to try to persuade us that actually has improved cost and quality outcomes.  Most recently a report sponsored by the Robert Wood Johnson foundation says it will correct “misconceptions” about the effect of the law on health spending.   (RWJ Report)  The report keys off of projections for health spending made shortly after the reform law was passed, and says, gee, things didn’t turn out quite as bad as that.  As the report notes, however, much of the difference is attributable to Medicare payment cuts and to the fact that the Medicaid expansion became optional for states after the Supreme Court found the mandatory provision of the law unconstitutional.  The recession’s effects have also taken far longer than CMS expected to ameliorate and those effects have dampened inflation and health spending.  The report’s authors also try to tell us that the problem of costs and access on the individual insurance exchange markets aren’t as bad as we hear, because after all, there are a couple of states that still have a semi-functioning exchange.  Funny, every week now seems to bring yet another story about an insurer leaving the exchanges or double-digit premium increases.  Finally, they say Medicaid spending per enrollee has had low growth. But Medicaid spending rates are complicated by an extensive ongoing shift to managed care plans, which may be a one-time factor, and constraints on Medicaid reimbursements.

There are a number of ways to analyze the impact of the reform law.  One is compare the outcomes to what former president Obama and his apologists said the law would do–which was to lower health spending a lot more than this, and in particular, for the majority of Americans covered by private health insurance, the promise was that it would actually lower premiums and out-of-pocket costs.  There can be no debate that in fact the opposite happened.  It is true the Medicare spending growth has slowed, but that is solely due to mandated reductions in payments to providers–it has nothing to do with reforming the health system.  The law attempted to expand access in two ways; one was expanding Medicaid eligibility and one was mandating that all individuals have health coverage and providing exchanges and subsidies for people to buy it.  The Medicaid expansion has added a lot of people, but it is pretty clear that it is not affordable in the long run for the states or the federal government.  The exchanges are in the final stages of complete collapse in many states.  Private insurance costs and out-of-pocket spending are actually accelerating and that is what most Americans are aware of when they think of health care.

The unknowable is what health spending would have been like absent the reform law.  Looking solely at the provisions designed to expand coverage, in total dollars it almost certainly would have been lower and the trend rate probably would have been as well.  Pushing down on Medicare reimbursements likely pushes up on commercial ones.  Medicaid providers were bribed with extra payments to keep them in the program, but even that hasn’t avoided access problems.  And that pushdown of Medicare reimbursement would have occurred even without the broader health law reform, because Congress continually has to take action to protect the Medicare trust funds, which still are projected to run out of money in the not-too-distant future.  A fair analysis would almost certainly concluded that the country is spending more on health care with the law than it would have without it.

Here is the real problem with this and many other so-called pieces of research, whether in health care or other topic areas.  They are ideologically driven–the organizations that sponsor and fund them and the people who write them have a point of view and they are more interested in advancing the point of view than in providing thoughtful analyses and full descriptions of facts and caveats.  RWJ and its related institutions definitely fall in this category and this report, like most their output, falls in the category of advocacy research, which isn’t really research at all.

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