Major Vindication for Obamacare: ACA Increasing Coverage AND Reducing Cost

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By the end of February, 4.2 million Americans enrolled in for private health insurance plans set up by the Affordable Care Act, and counting those determined eligible for Medicaid through the ACA's massive expansion of the program and young adults who are now on their parents' plans thanks also to the ACA, nearly 14 million Americans now have health insurance directly tied to Obamacare. The number could easily be 19 million had Republican governors and legislatures not kept 5 million Americans from getting coverage through Medicaid at zero costs to their states. And the number doesn't even account for the countless millions who already had insurance but now have no lifetime or yearly limits on their benefits, are free from the fear of being dropped should they get sick, and no longer have to pay a copay for preventive care visits.

And a bombshell report just dropped this week showing that the Affordable Care Act is achieving yet another stated purpose: reducing health care costs while increasing coverage. As Gallup finds the rate of uninsured has fallen to its lowest since the financial crisis, data from Goldman Sachs shows that in January, the price of both health care and health insurance fell. While the drop in the health care costs were attributed largely to ACA's legally mandated small cuts to Medicare provider payments, the far more interesting part, to me, was the fact that health insurance prices also dropped - dropped, not increased at a smaller rate, but actually dropped.

Including the expected surge of signups this month as the open enrollment period comes to an end on March 31, sign-ups are poised to surprise a lot of people when it's all said and done. While coverage is central to the ACA though, controlling costs is not only one of its essential promises but also critical to the success of the coverage related provisions. That is why the January drop in health insurance rates and health care costs are so important to consider.

The idea that the Affordable Care Act would control health care costs was poo-pooed by both ends of political spectrum. The far Right disingenuously argued that imposing basic requirements that insurance companies cover maternity and mental health care would drive insurance companies to raise prices. The ideological Left, angry at the President for accepting a bill without their venerated public option, posited that without a government insurance option to keep private insurance companies in check, the death-by-spreadsheets industry would have no incentive to control costs themselves.

We, at TPV, predicted otherwise. In a four-part series exactly four years ago (March 2010), I argued that despite the plethora of tantrums from the Left and Right as well as some legitimate shortcomings in the legislation, the Affordable Care Act would make serious efforts and be seriously effective in controlling health care costs. Let's have a brief look at the big ticket items I argued as cost-savers in the eve of health reform's passage and see how they stack up as of today:

  • Tough insurance company regulations including community rating and maximum medical loss ratio: Insurance companies are forced to spend 80-85% of premium revenue on actually providing care, and are only allowed to vary premiums in a limited way based on age (up to 1:3) and smoking habits (1:1.5). In 2012, the medical loss ratio provision put $1.1 billion back in the pockets of health care customers, and in 2013, an additional $500 million. This provision continues to act as a hammer on insurance companies, both keeping their rates in check and forcing them to better negotiate their payments to providers.
  • Competition within the health care provider sector: An $11 billion investment in community health centers which would directly compete in the primary care sector as well as revolutionizing Medicare payments to focus on results rather than number of procedures. By the end of 2012, Community Health Centers increased their capacity by nearly 25% to 21.1 million patients served, and by 2019, is expected to almost double this capacity.
  • A focus on primary care and wellness: the ACA's focus on wellness and primary care begins with making primary care visits free of copays. Over 100 million Americans now have access to free preventive care services.
  • Extracting concessions from the pharmaceutical industry on Medicare drug benefits in order to close the Part D donut hole: Seniors and individuals with disabilities saved a total of $9 billion as of last year because of Obamacare's savings.

Since the enactment of the Affordable Care Act, health insurance premiums have grown at the smallest rates in decades, and that trend has continued even as the economy has improved. Even more critically, health care spending growth is now at an all-time low. For the first time in a very, very long time, health care inflation during a time of economic expansion is now actually essentially the same as overall inflation.

The Affordable Care Act has two premises and two purposes: to expand coverage and to rein in cost growth. The law has barely become fully effective, but it seems to already be succeeding in both (and succeeding rather wildly in reining in costs). In short: it is working exactly as it was intended to.

This is also a vindication for pragmatic policymaking. Despite the ideological pant-wetting from each of the far ends of our political spectra and our media's seemingly endless fascination with anything and everything beside the facts, and despite its imperfection, the Affordable Care Act is a good, solid, transformative law being administered by a president absolutely dedicated to the proposition that American health care can and must do better.

And politically speaking, the numbers have plenty of fodder for Democrats running in this year's Congressional election. You wouldn't know it to look at media outlets, but the numbers give Democrats a clear direction: embrace the Affordable Care Act, don't run away from it. Challenge Republicans on why they want to repeal a law that makes affordable health care available to millions of Americans and why they don't like a law that is finally succeeding in reining in health care spending. The numbers are something to be proud of not because they spell success of a policy but because behind the numbers are millions of Americans who are benefiting from health reform - in health and in wealth. Let's take that message out to every corner of America - red, blue, purple.

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