Is Affordable Care Act Responsible for Decrease in Cost of Health Care?

December 3rd, 2013

You have to read this NYT article closely, and you will find that reductions in health care began before the ACA was implemented, and the law has only had a minimal effect on “bending the curve.” The decrease began before the ACA was even enacted.

Over the next few years, the government is expected to spend billions of dollars less than originally projected on the law, analysts said, with both the Medicaid expansion and the subsidies for private insurance plans ending up less expensive than anticipated.

But even though the Affordable Care Act might be more a beneficiary of changes in health care spending than the primary driver of them, the law’s provisions to control costs could prove increasingly important as the economy improves, demand for health care increases and spending picks back up.

“It was a trend that was happening; we noticed that trend; we took advantage of that trend,” said Jason L. Furman, the chairman of the White House’s Council of Economic Advisers. “Some of it was the Affordable Care Act catching up with the private sector, and some of it was pushing the private sector forward.”

Administration officials have pointed to falling hospital readmission rates as one strong sign that cost-control provisions in the Affordable Care Act are working. Also, they noted that a growing number of insurers and health care providers are agreeing to contracts that pay for the quality of care, rather than the quantity, another indication that the law’s encouragement on that front is starting to pay dividends.

Though, indirectly, the President should take some credit here. It is the weak economy that has slowed healthcare spending.

Economists broadly agree that the sluggish economy remains the main reason that health spending has grown so slowly for the last half-decade. From 2007 to 2010, per-capita health care spending rose just 1.8 percent annually. Since then, the annual increase has slowed even further, to 1.3 percent. A decade ago, spending was growing at roughly 5 percent a year.


But those are responsible for only a tiny portion of the slowing rise of health care costs; other changes, like rising deductibles and copays that discourage some people from seeking extra services, play a bigger role, analysts say. Still, the Kaiser Family Foundation, a nonprofit research group, estimates that the weak economy accounts for as much as three-quarters of the slowdown in the growth of spending on health care.

So our “sluggish” economy has resulted in a decrease in healthcare spending. Is that a good thing?