Conservatives: Healthcare Spending Decrease in Motion Before Obamacare

Conservatives: Healthcare Spending Decrease in Motion Before Obamacare

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Former President Bill Clinton said on Wednesday at the Democratic National Convention that the growth of health care spending has remained under four percent “for the last two years,” in an apparent attempt to link the lower costs with the passing of President Obama’s 2010 health care reform law.

“And for the last two years, health care spending has grown under four percent, for the first time in 50 years,” Clinton said.

But conservative critics quickly reacted to the statement.

“[The] rate of spending increase has been less because of recession and coverage is less affordable,” the Association of American Physicians and Surgeons tweeted Wednesday night.

The AAPS linked to a blog post written for John Goodman’s Health Policy Blog which noted that “premiums for health insurance and the share of premiums used for purposes other than paying claims” have been “increasing faster than in previous years.”

“That’s not exactly what President Obama promised, is it? In fact, it is the opposite of what he promised,” wrote John Graham, a Senior Fellow of the National Center for Policy Analysis.

The annual rate of increase for family premiums, for example, more than tripled in 2011 to 9.5 percent from 2010.

Graham, who conceded that health care costs have “increased at a slower rate than in previous years,” noted that the annual rate of increase in spending on private health insurance dropped to 2.4 percent in 2010 from 7.8 percent in 2007.

In between that time, the rate increase dropped to 4 percent in 2008, to 2.6 percent in 2009.

When unemployment dropped as a result of the “crisis of 2008” – the author doesn’t define the phrase – the number of Americans with health coverage dropped, which in turn contributed to the lower overall rate of increase in private health spending.

What happened next was what anyone would reasonably expect, he argued: Private health insurers frantically began to compete for the existing pool of Americans still employed.

Additionally, Graham noted, the rate of increase in net costs of health insurance – the portion of health insurance that doesn’t pay for medical claims – was 11.8 percent in 2007.

But in the next two years the rate of increase in the net cost of health insurance went negative.

In other words, the rate of increase in net cost of health insurance went down in 2008 (-1.4 percent) and 2009 (-2.2 percent).

In 2010, the same year the Patient Protection and Affordable Care Act was passed, the net cost of health insurance shot back up to 8.4 percent.

And according to estimates from the Altarum Institute, aggregate annual health spending increased in 2011 by 4.5 percent from the previous year, Graham noted.

The actual cause of the premium increases is two-fold, he wrote.

On the one hand, the consumer protections built into the law, such as extending coverage to children with pre-existing conditions and covering preventive health services, are leading to higher premium costs.

On the other hand, as choice and competition wanes and insurers drop coverage for some people altogether, that too contributes to higher premium costs.

“Obviously, as insurers flee, those who remain will reap the benefits of reduced competition,” Graham wrote, noting that average operating profit margins of UnitedHealth Group, Aetna, Cigna, and Humana – the four largest insurers in the United States – have increased 8.24 percent in the 18 months following the signing of the law in March 2010.

In contrast, the top four insurers average operating profit margins was 6.8 percent in the 18 months prior to the passage of the law.

Peter Suderman, a Senior Editor at Reason Magazine, a libertarian enterprise, tweeted during Clinton’s Wednesday night speech, “In fact, health care cost growth started to moderate before Obama or Obamacare.”

In the Reason.com post he tweeted, Suderman wrote that J.D. Kleinke, a health policy expert at the American Enterprise Institute, noted in a Wall Street Journal op-ed that data compiled by the Centers for Medicare and Medicaid Services indicate that health spending began to slow many years before the recession.

But unlike Graham, who pointed to the recession, unemployment, and insurance industry competition for the sloth-like growth in health care spending, Kleinke took a different take.

“This is a trend that has been going on since 2002 and 2003 because of profound changes in the market,” Kleinke told Suderman in a phone interview.

So what was it that slowed the growth in health care spending?

Consumer-driven health plans (CDHPs) and Accountable Care Organizations (ACOs), Suderman said.

He added that enrollment in CDHPs as of January 2011 was up 1.4 million from the previous year, and that the most successful ACOs were in place before health reform in 2010 and some ACOs declined to participate in the ACO program offered in health reform.

Kleinke said that the rise of generic drugs, changes in consumer behavior, improvements in medical care and from insurers, and “marketplace disciplines on the demand for medical care” contributed to the slower rising costs in health care.

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