October 03, 2016
Dean Baker
Truthout, October 3, 2016
Most people would consider it pretty bad luck if they had three inches of rain dumped on their city in a 24-hour period. That is, unless they had just missed being hit by a hurricane. That analogy captures how we should feel about Obamacare.
There are still tens of millions of people without health insurance. An even larger number of people have great difficulty covering the deductibles and co-pays required by their insurers. In many cases, even people with insurance go without necessary care because they can’t afford these expenses. And we still have jokers like Martin Shkreli and the Mylan EpiPen crew jacking up prices on life-saving medicines. There are plenty of reasons to be angry about the current state of our health care system, but like the city that just missed being nailed by the hurricane, we have to realize that it could be much worse.
This isn’t idle speculation. In 2009, President Obama’s first year in office, the Center for Medicare and Medicaid Services projected that health care spending would take up 19.3 percent of GDP in 2016. The most recent projections show health care costing 18.1 percent of GDP this year.
That sounds really nerdy, but the difference between these two projections amounts to more than $220 billion in savings this year. That comes to $690 per person in savings or $2,750 for an average family of four. This is real money to most people.
One reason that the slowing in health care costs is not widely recognized is that most people are not studying the projections. While just about everyone living in a coastal city will know about the forecast of a hurricane strike, few people spend their time studying health care cost projections. This means that when spending slows sharply, as it has in the last seven years, most people don’t recognize the slowdown. They just know that health care costs more than it used to. This is the case of people getting hit by three inches of rain and not recognizing that they just missed a hurricane.
The other reason most people may not see the slower cost growth is that they don’t pay for most health care directly. The overwhelming majority of people in the country have most of their health care paid for by their insurer or the government. When the insurance companies and the government see savings, the typical family does not directly feel the benefit in their pocketbook.
However that doesn’t mean they don’t benefit from these savings. For most of the last four decades workers were seeing an ever larger share of their compensation going to cover the cost of their health care insurance. Money that might have otherwise gone to wage increases went instead to pay for their health care plan. The opposite has been the case over the last seven years with the cost of health care and other benefits declining from 13.8 percent of total labor compensation in 2009 to 13.1 percent in 2015.
If spending had continued on its prior path, health care and other benefits would now account for more than 15 percent of compensation. While not all employers passed on these savings, on average workers’ paychecks are almost 3 percent higher because of the slowing of health care cost growth.
The other big saver is the government. The federal budget deficit would be almost $200 billion higher in 2016, if health care costs had followed the path projected before the passage of the Affordable Care Act (ACA).
This is the good news from Obamacare. Of course the even better news is that the number of uninsured has fallen to a record low. And, we now have clear evidence that this is leading to improvements in health outcomes. States that expanded their Medicaid program, as provided for in the ACA, have seen improvements in health outcomes for low and moderate income people compared to states that did not.
All of this is important background, because the public has to recognize the enormous progress that has been made with the ACA so that the huge problems that remain in our health care system can be fixed. At the moment, most Democrats are scared to talk about the ACA because their focus groups tell them it is unpopular. That means the only people talking about the ACA are Republicans talking about it are death panels and comparing it to slavery.
We have to reduce the amount that people pay out of pocket, end charges for many times of preventative screening and introduce a Medicare-style public option in the health care exchanges. But these and other steps can only take place if politicians who support the ACA feel comfortable talking it. That will only be the case when people recognize the benefits it has brought.
No one should be satisfied with the health care system as “reformed” by the ACA. But it is important that they recognize the progress it has brought and that we can make much more progress by building on its success.
