The United States is spending trillions — yes, trillions — less on health care than government forecasters expected when Obamacare passed in 2010.
Back then, the Center for Medicare and Medicaid Services estimated that the United States would spend $23.7 trillion on health care between 2014 and 2019.
But the forecasting agency has regularly and repeatedly revised spending estimates downward over the past six years. In 2015, it estimated that health care would cost the United States $2.6 trillion less over that same five-year period, a new analysis from the Urban Institute and the Robert Wood Johnson Foundation shows.
"It’s a pretty significant reduction, and really across all types of spending," says John Holahan, a fellow at the Urban Institute and co-author of the new report.
This isn’t to say that the health care law caused health costs to grow slower than expected. The authors of the report make it clear that while the Affordable Care Act may have played some role, it is far from the main contributor.
Rather, the figures show that the Affordable Care Act hasn’t exploded the federal budget, as critics charge. Quite the opposite — health costs have risen modestly as the uninsured rate has dropped to the lowest level on record.
Medicare alone has cost $455 billion less than expected
One remarkable fact about the lower-than-expected health costs is that they stretch across the entire health care sector. Medicare spending has come in lower than expected:
So has Medicaid spending:
And so has private insurance:
A bit of this has to do with lower-than-expected health insurance enrollment.
Medicaid, for example, has millions fewer enrollees than CMS initially expected — a product of the Supreme Court making the program’s expansion optional in 2011.
But this isn’t the case everywhere: Medicare, for example, is expected to have 700,000 additional enrollees in 2019 for $96 billion less. Think about that for a moment: Medicare will be spending less money to cover more people.
This has everything to do with the fact that per-person costs of health care are dropping. Forecasters now expect Medicare to spend $12,527 per person in 2019 — significantly less than their estimate of $13,990 in 2010.
One reason health spending is lower: Obamacare cut Medicare prices
The health care law significantly reduced certain Medicare payments. It also created dozens of new programs that pay hospitals based on the quality of care they provide, not just the quantity.
CMS knew all of this when it forecast health spending in 2010. But it didn’t know how exactly the changes would play out — whether hospitals, for example, would sign up for the pay-for-value programs or if they would change the trajectory of health spending. Much to health wonks’ frustrations, some forecasting agencies refused to estimate any savings from these programs. At the time, they were just too unknown.
Now there’s at least some evidence that a handful of these programs are working to reduce costs. Hospital readmissions, for example, have fallen sharply since Medicare began penalizing providers for those unnecessary repeat visits.
Less health spending is good news for budgets — not so much for consumers
Budgeteers will likely cheer the slower health cost growth. Less spending on health care means more money for the government to spend on other things like education or infrastructure.
But for individual consumers, slower health spending likely doesn’t feel cheaper at all. In fact, it probably feels more expensive: One big way private insurers have held down costs is by asking consumers to pay a larger and larger chunk of their medical bills.
Deductibles and copays have steadily grown over the past decade. Separate research shows that patients use less health care when they have to pay more. Sometimes they cut out unnecessary care — but patients will also skimp on the care they need, too.