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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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January 14, 2014 at 5:57 pm

If you are paying OUT less to the healthcare providers, then of course, health care expenditures will go DOWN. Does this mean we NEED LESS Healthcare? No. This is another false impression. Now, you will get less, I guarantee you will WAIT longer and you will pay MORE for the same darned care. Instead of the insurance paying OUT, YOU will pay out. so, that looks like there is LESS spending.

January 14, 2014 at 4:52 pm

Orlie Martinez seems to think he can solve the problem by calling people vile names. You can always tell a liberal moocher; No solutions,just attacks on people who tell the truth. REPEAL OBAMACARE!!

January 14, 2014 at 4:36 pm

Obama is going to take a total of $710 billion from Medicare to help fund Obama care it was very public yet seniors voted him to 2nd term,he's already dropped our drug coverage by $$120.00 per year and it will go down every year for b9 more years,thats just the beginning Doctors fee's have been lowered Seniors should have read the paper before you pulled the lever for another term now you have to live with it

Jack Dawson
January 14, 2014 at 3:13 pm

I believe that having more people covered under Medicaid from the new Affordable Healthcare law is responsible for the drop in overall healthcare costs, even though many republican governors have chosen to not let many of their very own residents in their own red states be covered with Medicaid. I guess these republican governors like the long lines in the ER's.

January 14, 2014 at 1:54 pm

Conjecture and opinion isn't fact Paul. Facts actually involve research and figures. the fact is that people were going to the Emergency rooms without any form of insurance, getting treated and paying nothing. The State and feds were paying the shot with no return from the public for this care. Hospitals in turn were getting decreased funding and had to cut staff to cut their costs. With Obama care, everyone pays something and because of that everyone would contribute. its like auto insurance. Not everyone has an accident at once so it is cost effective. Health insurance is the same idea and philosophy. If you want hospitals and doctors and nurses to care for you we could not keep the status quo, it was bankrupting hospitals and states. The only way for health care to be contained and affordable is if everyone pays their fair share. Much the way the tax system should be. Everyone rich or poor should pay something.

January 14, 2014 at 1:37 pm

I recently got a bill for lab tests for about 400$. My insurance company got a discount for about 350$ paid nothing and I paid the balance of about 50$.If I didn't have insurance my bill would have been 400$ yet the insurance company paid nothing. Maybe if more people have insurance we are not paying for as many folks who get care and can't pay.

orlie martinez
January 14, 2014 at 1:02 pm

hey paul, its people like you that are destroying this country. I would bet you are white, live in the south, and are a birther. I also think you are a white trash racist. people like you will rot it hell.

January 14, 2014 at 12:53 pm

What happened to my comment every thing was facts what is this CNBC

January 14, 2014 at 12:25 pm

No, it is because everyone is terrified of going to the doctor, because of $1000 deductibles, and they can't afford the insurance premiums. Anyone with half a brain knows medical costs are skyrocketing because of obamacare, and the quality of care will decline. Add to that the coming shortage of doctors who won't make any money by treating moochers on medicade, and you have the liberals' dream that everyone just gets sick and dies to save the planet from so-called "global warming", (or is it global cooling now?)

Joe Hevezi
January 14, 2014 at 11:53 am

Of course, I've noticed that medicare has cut a lot from the re-imbursements to hospitals & doctors, etc. Medicare even stopped for a while putting the disclaimer on my bill copy that those people accept whatever medicare says the procedure is valued at.
My complaint is that those people will eventually stop seeing medicare patients