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Is Obamacare Responsible for Healthcare Savings?

e21 | 11/26/2013

Many are claiming the Affordable Care Act (ACA) is responsible for lowering healthcare spending’s projected growth. David Cutler, a White House advisor, wrote an article for the Washington Post on November 8th saying President Obama’s previous assertions that the ACA would save $2,500 per family have been shown to be correct. 

Mr. Cutler came to this conclusion because the Office of the Actuaries at the Centers for Medicare & Medicaid Services (CMS) has lowered its forecasted medical spending for 2016 by 1 percentage point of GDP. He is mistaken since the projected savings are coming from other areas, not from the ACA. As can be seen by the red line in the graphic below, once the ACA was passed, the CMS increased healthcare’s projected costs as a share of GDP. 

The most recent update to the projections, from September of this year, is shown by the blue line. This is what Mr. Cutler used to support his claim that the ACA cuts costs. He is correct to say healthcare spending as a percentage of GDP is a full one percent lower than the 2009 pre-ACA estimates. However, the CMS assigns the responsibility for this decrease to other factors. According to a CMS memorandum, the following factors were responsible for the lower costs:

1) Medicare/Medicaid/other programs “unrelated to the ACA” (51 percent of improvement).

2) Other factors “unrelated to the ACA” (26 percent).

3) Updated data on historical spending growth (22 percent).

4) Updated macroeconomic assumptions (6 percent).

This adds up to 105 percent of the total improvement—meaning the impact of the ACA increased healthcare costs.

While the ACA may have some cost-saving provisions, it is not true that it was the sole, or even main, cause of the decrease in healthcare costs. Similar to the Administration’s assertion that “if you like your plan, you can keep your plan,” the argument that the ACA lowers healthcare costs is simply incorrect.

 

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