Published Monday, December 2, 2013 at 1:00 am / Updated at 12:36 pm
Froma Harrop: Health care law will be great reform

During the botched rollout of the Affordable Care Act, it’s been hard to defend the law, much less to call it “great.” But great it is — for the American economy and for the American people, rich ones included.

The program has already succeeded in one of its key backbreaking missions: to curb the exploding costs of health care. The president’s Council of Economic Advisers issued a report late last month containing lots of good news on that front.

Since Obamacare was passed in 2010, the growth in health care spending has slowed to the lowest rate on record for any three-year period since 1965. “If half the recent slowdown in spending can be sustained,” the report says, “health care spending a decade from now will be about $1,400 per person lower than if growth returned to its 2000-2007 trend.”

The authors further note that the benefit will go to workers in the form of fatter paychecks and to taxpayers as federal and state governments cut projected spending on health care. Another plus would be more jobs as employers feel less burdened by the costs of covering their workers.

What about the recession? One may reasonably ask whether the economic downturn was responsible for cutting the growth rates of medical spending. Yes, but not by much, the authors respond.

They note that the slowdown has persisted well beyond the end of the recession. Very importantly, it also applied to Medicare, a government program whose elderly beneficiaries are more insulated from a weak job market. And the growth in prices for health services (different from total spending) has eased significantly.

Here’s how the health care reforms did it:

>> They reduced the overpayments to private insurers’ Medicare Advantage plans and the price increases for providers.

>> They’re promoting new payment models, whereby medical providers are being financially rewarded for giving good care in an efficient manner. Under the old setup, providers could enhance their incomes by pumping up the volume of visits, tests and other services.

The reforms encourage the growth of “accountable care organizations.” The more efficiently these groups of medical providers operate, the more money they get to keep.

>> Hospitals with high readmission rates are penalized. This is also a quality issue for Medicare beneficiaries, who are often discharged with inadequate planning for post-hospital care. Under a perverse set of incentives, hospitals were making more money when elderly patients returned. The taxpayers, of course, picked up the bills.

>> Changes in Medicare should spill over into the private sector, generating even more savings. Medicare’s payment structure is often the starting point in negotiations between private insurers and medical providers.

What about the rich? All this conservative talk about Obamacare’s “redistributing” wealth to the less well-off ignores this reality: Every time medical spending rises, so do the taxes (of those who pay income tax) and the premiums for those who buy their own coverage.

I mean, who do you think has been paying for all those uninsured people showing up at expensive hospital emergency rooms for free care?

For those worried about federal deficits, here are some encouraging numbers, courtesy of the Affordable Care Act: The Congressional Budget Office recently cut its projected Medicare and Medicaid spending in 2020 by $147 billion. It expects the reforms overall to reduce the deficit by more than $100 billion from 2013 to 2022.

All of this great stuff has been obscured by the bungled launch of the federal government’s HealthCare.gov website. Once it is up and running, the conversation should turn in a more positive direction.

Those who read the advisers’ report won’t have to wait that long. Google “Council of Economic Advisers” for a copy.

Contact the writer: fharrop@projo.com

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