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The Weeds: Obamacare will cost trillions less. Maybe that's not a good thing.

An Obamacare sign is seen on the UniVista Insurance company office on December 15, 2015, in Miami, Florida.
An Obamacare sign is seen on the UniVista Insurance company office on December 15, 2015, in Miami, Florida.
Joe Raedle/Getty Images

The numbers out last week from the Urban Institute and the Robert Wood Johnson Foundation definitely seem like a win for Obamacare.

According to the report, the US is on track to spend $2.6 trillion less on health care between 2014 and 2019 than originally projected. Spending is down and the number of Americans with coverage is up: There seems to be a lot of reasons to feel optimistic about the state of health care in this country, right?

The short answer is "yes, probably." The longer answer, tackled by Vox’s Matt Yglesias, Ezra Klein, and Sarah Kliff on the latest episode of The Weeds, is a bit more complicated. (The discussion of health care spending starts at around the 48:48 mark; you can listen to it at the link below or by downloading the show on iTunes.)

The first point of clarification is that the results of the study do not mean that health care spending is decreasing — it’s just increasing at a slower rate than initially projected by the Centers for Medicare and Medicaid Services.

Furthermore, as Kliff has previously noted, there’s no reason to believe that the slower growth is directly attributable to Obamacare itself. There are just too many factors at play here, and disentangling them isn’t really feasible without more historical distance.

Toward the end of the podcast, Yglesias throws yet another important wrench into the mix: Even as we celebrate the decrease in projected spending, we can’t be entirely sure that we aren’t worse off because of it:

What will be interesting for real health researchers to look at is: Are we suffering? Are we becoming health care deprived? The high deductible is how patients experience it, but from a macro level, it’s like: Okay, we were adding square feet of hospital at a pretty rapid per capita clip, and we’re not any more. But the population is aging, people, as far as I can tell it’s not obvious that we need less health care. So what are we cutting out? Are we doing a good job of getting by with less? Or is there a problem?

In a properly socialist system, this is a very explicit trade off. People will say, the wait times are too long. And someone will say, let’s fix that by building more hospitals. And someone else will say, I don’t want to spend that money. In America, the same basic trade-offs between spending and capacity exist, but the exact mechanisms by which they happen are a little opaque and unclear, and we’re going to have to look back over time. Do we not have enough hospital beds? Are people sick? Or is everything fine, and we’ve just started using our resources on, say, iPhones?

Depending on your perspective, it’s possible to interpret this news as indication that we already are "suffering." Still, that point of view may neglect the entire story, as Kliff points out:

I think it’s helpful to talk about why this [projected spending decrease] is happening. Why has this played out differently than we thought? One of the things is about coverage. The Medicaid expansion that we actually talked about earlier — you have less people being covered through the Medicaid expansion than initially projected because it was made optional. I think about 8 million less. …

So some of it is coverage. For some people, that might be a bit of a sad story. You want more coverage. It’s a bad sign that you’re spending less because fewer people are getting coverage. But the majority of this story isn’t that. The majority of this story in Medicare, which covers older Americans and private insurance, is that we’re just spending less per person than we thought we would.

One of the most stunning numbers in this report is that right now, in this period we’re talking about between 2014 to 2019, we’re going to cover 700,000 more Medicare beneficiaries for less than we had expected six years ago. … Understanding why that happened is a really hard question. Some of it has to do with the hangover move from the recession, which drove down health care prices a little bit, but shouldn’t actually have had much of an effect on Medicare.

Some of it might be Obamacare. It might be these programs in Obamacare that penalize readmission. So if you have an unnecessary readmission to a hospital, you don’t get paid for it. That might be changing hospitals’ behavior, changing what we’re spending on these readmissions. Then you have the private insurance side, where it actually feels from the consumer’s perspective like a shitty story because most of the ways we’re having savings is that we’re asking patients to pay more. So we’re saying your deductibles are going up, your co-pays are going up, and pretty much all that we know about health insurance suggests that when you make people pay more, they use less of it. They use less unnecessary care, and they use less necessary care.

So there’s a whole basket of things happening. Some of them feel really good, like we’re saving money the right way, and some of them feel like we’re saving money by not covering people, and some feel like we’re saving money by asking people to use less health care. It’s all working together for less health care spending.

Show notes:

The Weeds also discussed:

  • Dylan Matthews’s magisterial welfare reform explainer.
  • Matthews’s look at whether welfare programs make poor people lazy (they don't).
  • What is a "basic income," and where is it being tried?
  • Matthews’s piece on the overlooked ways food stamps really do help alleviate poverty.
  • At this point, we should probably just link to Matthews’s entire author page, where you can find even more work about government welfare, effective altruism, and other looks at poverty. Here it is.
  • The politics of Kentucky’s Medicaid expansion proposal.
  • Vox’s coverage of last week’s critical Supreme Court ruling on immigration.
  • More Vox coverage of that big immigration decision.

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