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Is Obamacare cutting health tab?

By Jay MacDonald ·
Tuesday, January 14, 2014
Posted: 6 am ET

Maybe it was coincidence. Or, sunspots. Or, an unexpected outbreak of wellness across the land.

Whatever the underlying cause, new federal data unveiled last week confirm that U.S. health care spending's share of the overall economy fell in 2012 for the first time since 1997.

While experts are puzzled over exactly why, no one is ruling out the possibility that President Barack Obama's landmark Affordable Care Act may already be having a gentle braking effect on runaway health care spending.

Slower growth in health spending

The new data, published in Health Affairs, shows that health care spending grew by 3.7 percent in 2012, about one percentage point slower than the rest of the economy, dropping its share of gross domestic product from 17.3 percent to 17.2 percent from the previous year.

Health care spending growth has been running below 4 percent annually since the economy tanked in 2009. That's consistent with the historic response to economic recessions.

The question posed by the latest numbers is whether this anomalous downtick only reflects a continued response to the Great Recession, or whether there's a fundamental sea change afoot in the health care and health insurance industries.

"There are two explanations," says Harvard University economist and former Obama health care adviser David Cutler. "One is the recession was a big and drunken episode that has a very long hangover. The alternative view is that something big has actually changed."

Is Obamacare the reason?

That "something big," of course, is exactly what the Obama administration is shooting for with the Affordable Care Act. The nonpartisan Congressional Budget Office expects Obamacare to save the federal government more than $700 billion in the next decade.

While the feds estimate that health care reform has had a "minimal" effect on overall health cost containment so far, its impact is expected to grow significantly with the economic recovery. The Kaiser Family Foundation estimates that the various initiatives of Obamacare together may already be contributing upwards of 25 percent to containing health care costs.

"That's real change in the health system," says senior Kaiser adviser Larry Levitt.

In Cutler's view, the CBO may actually be underestimating the potential boon from Obamacare because its estimates are based on health spending growth returning to its previous skyward trend once the economy recovers. If the recovery remains slow and Obamacare does its job, he predicts a savings to the economy of $750 billion in the next 10 years.

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Jack Dawson
January 14, 2014 at 6:28 pm

Typical tea party republicans. Tired of being wrong on just about every front. Rather cry wolf than solve America's problems.

January 14, 2014 at 5:59 pm

Just because everyone now has health coverage doesn't cause the drop in health care spending,deductibles are now going through the roof for most people so they are hesitant to go to the doctor....ER fees for me went from $75 to $150...prescriptions went up....everything has.

How is "everyone" now paying something when they go to the doctors? If they were getting free or just not paying for healthcare, ER visits etc before they still probably aren't paying anything....don't work? wont pay health care!

I believe that I heard the percentage a hospital get paid from Medicare has been cut in about half. New health care reforms now have hospitals really crunching numbers....reducing staff and lowering raises. Most hospital employees are only getting a 2.5% pay increase.

Another government fix is to raise minimum wages.....when will people learn raising minimum wages doesn't help anyone, we all just pay more for everything...not to mention it might even drive more manufacturing companies/factories out of the USA due to cheaper labor.