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View: Obamacare is smaller than anyone expected

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(Bloomberg View) — My recent column on the sixth anniversary of the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare, generated some energetic criticism — or, rather, half a paragraph of it did. While I acknowledged that many Americans have benefited from the law, I also said that the Obama administration was too eager to give it credit for slowing the growth of health-care spending. This slowdown, I pointed out, had begun in 2002, years before Obamacare was enacted. (I could have added that the decline was not confined to the U.S.)

Jonathan Chait, a journalist who strongly supports Obamacare, says that my skepticism about the law’s effect on health spending amounts to a refusal to face reality, or even to an attempt to craft a message that will appeal to “crazy” Republican voters.

He argues that we should look at a longer timeline. The early 2000s saw “unusually elevated levels of health-care inflation.” They gave way first to “historically normal health-care inflation rates that were still unsustainably high” and then to much lower post-Obamacare rates. So the law, he contends, made a difference.

Widening the lens, though, does not make Obamacare look any more effective in restraining costs. Slide 6 of this White House report on the law’s sixth anniversary shows a long though jagged decline in health-care inflation rates, with a peak in the early 1980s, a lower peak in the early 1990s, and a much lower peak about a decade ago. Obamacare looks like a non-event in that slide (even though the White House puts verbiage beneath the graph that gives itself credit).

The administration has in the past touted per-capita health spending as another measure that backs its view of the Obamacare effect. Again, though, its own graph showed no such effect.

Chris Conover, writing in Forbes, looks at several decades of data on health-care spending as a share of GDP; he doesn’t find any evidence that Obamacare has bent the cost curve downward, either. And a recent study finds that the great bulk of the post-Obamacare decline in health inflation can be explained by trends that predated the law’s passage.

The most recent data we have show that health spending in 2014 grew at the fastest rate since 2007. That might be expected in a year when many of the law’s subsidies started flowing. But the Centers for Medicare & Medicaid Services (CMS) project that the annual rate of growth of national health spending will keep rising over the next five years and then level off a bit — at a rate higher than we saw in 2008 or 2009. In part this is because “medical inflation rates are anticipated to return to levels closer to the decade prior to the recession.”

All in all, the evidence that Obamacare has reduced health inflation does not look especially strong. What the law’s supporters can fairly say in its favor is that health inflation did not rise, either, as many of the law’s critics predicted. Chait points to a 2011 article I co-wrote saying that the law “exacerbated” the causes of health inflation. This is different, of course, from saying that health inflation would jump in the first years after the law was enacted and carried out. But it’s true there has been less health inflation than I expected.

If Obamacare has done less than I expected to raise costs, perhaps it is because it has done less than expected, period. When it passed, the Congressional Budget Office (CBO) predicted that by the end of 2015 an additional 28 million people would be getting coverage either through the law’s health exchanges or through its expanded Medicaid program. As I noted in the column that drew Chait’s ire, the actual number has been about 19 million. Obamacare has turned out to be a smaller program than anyone thought it would be.

The law has its die-hard supporters. But most Americans don’t see it in nearly as rosy a light, and they’re not crazy.


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