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Obamacare gets a ‘C’ for ‘unsustainable’ medical tab

By   /   March 19, 2013  /   News  /   No Comments

BAD NEWS: President Obama warns that sequestration will hobble the military and the economy. Does he believe it?

NOT AS ADVERTISED: President Obama’s predictions of lower health-care costs are going in the opposite direction.

By Kenric Ward | Watchdog.org Virginia Bureau

FREDERICKSBURG – Rebutting White House claims that Obamacare will cut medical costs, a new study shows expenses will climb by hundreds of billions of dollars.

Manhattan Institute’s Center for Medical Progress, a market-oriented think tank, gives the Affordable Care Act a C grade for cost containment, saying there is “weak evidence that reforms will achieve their intended goals.” The study also cited “growing evidence of unintended consequences” as Obamacare is implemented.

“Obamacare was passed with the belief that it would cut costs. The reality is far different,” senior fellow Paul Howard said Tuesday.

“Our analysis indicates that (Obamacare) will do little to reduce health-care spending, and may go the other way. “

Disputing positive prognostications from the Congressional Budget Office and other government agencies, Howard said the rosy scenarios dismiss or discount “$1.9 trillion in new taxes” while “double-counting” anticipated benefits.

“It’s shifting money from other sectors into a health-care system that’s already deeply dysfunctional.”

The federal Centers for Medicare and Medicaid Services seem to agree. CMS projects that between 2012 and 2021, Americans will spend $36.8 trillion on health care. Without Obamacare, the tab would be $36.3 trillion. In other words, the nation’s health-care tab would be $500 billion less without the ACA.

The Manhattan researchers did acknowledge potential value in some reforms – which kept the ACA from receiving an even lower grade.

“Specifically, Obamacare seeks to increase outcome-based care in Medicare through the use of Accountable Care Organizations. ACOs allow providers who can offer better outcomes at lower costs to ‘share in the savings’ with the federal government,” the report noted.

But even there, Howard and research associate Yevgeniy Feyman cautioned that evidence on ACOs is “mixed.”

A CMS pilot project from 2005 to 2010 failed to consistently show significant savings. Furthermore, the Manhattan report said ACOs also present antitrust concerns.

THROWING GOOD MONEY AFTER BAD: Manhattan Institute's Paul Howard says Obamacare makes the health-insurance system even more dysfunctional.

THROWING GOOD MONEY AFTER BAD: Manhattan Institute’s Paul Howard says Obamacare makes the health-insurance system even more dysfunctional.

“If they encourage greater hospital consolidation, which seems to be the case, then reduced competition may stymie any downward pressures on costs from bundled payments,” the study stated.

Nearly four years ago, President Obama predicted his law would reduce the average cost of a family policy by $2,500 by the end of his first term. Instead, family health costs increased by $3,065.

Grace-Marie Turner, president of the Galen Institute, a free-market organization, says companies are increasingly leery about hiring new full-time workers as Obamacare embeds itself.

The health law will require all employers with more than 50 workers to provide health insurance or pay a fine of $2,000 to $3,000 per worker every year.

David Rababy, a Virginia-based business consultant, said Obamacare dissuaded him from buying an established employment agency in the Fredericksburg area.

“We did research on the (employee) medical costs that would be required and found that it would leave a net company income of $50,000. That wasn’t enough of a margin,” he said.

“With so many unanswered questions (about the law), the risk was just too great.”

Moody’s Analytics confirms that the employer mandate “will have a negative impact on job creation.” But the credit-rating agency also warned that states’ bond rating could suffer if they don’t buy in to Medicaid expansion for indigent care.

Moody’s said pressure will be greatest in states, including Virginia, that opt out of Obamacare’s required Medicaid expansion, and have a relatively high proportion of uninsured residents.

While CBO estimates that average family medical premiums will hit $20,000 by 2016, Howard and Feyman advocate more market-driven reforms.

Noting that overall health insurance costs have been rising at double the rate of inflation, Feyman says, “Obamacare won’t change the underlying dysfunction in the health-care system.” Indeed, the Manhattan analysis forecasts that the new rules will “increase health-care consumption” and accelerate costs.

Arguing that Obamacare’s provisions are “unsustainable,,” Howard predicted that Congress “will have to walk back” many components of the program.

The Manhattan study urges policymakers to  concentrate on creating a market that moves low-income individuals into high-deductible programs to increase cost discipline.”

“Let people make smart decisions and reduce the subsidies,” Howard recommended.

Contact Kenric Ward at [email protected] or at (571) 319-9824. @Kenricward




Kenric Ward was a former San Antonio-based reporter for Watchdog.org.