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ObamaCare Will Lead to Dramatic Increases in Government Spending, Bureaucracy

Monday, August 01, 2011

A new analysis from the Office of the Actuary of CMS (and published in Health Affairs) breaks down how much more government will be spending on health care as a consequence of the PPACA. This analysis concludes that in 2014, when ObamaCare kicks in, the growth rate for government spending on health care will increase by 50% compared to the year before (increasing from a growth rate of 5.5% in 2013 to 8.3% in 2014).

The analysis also includes the following specifics:

Cost of Bureaucracy: Under the PPACA, spending to fund government health care bureaucracy and administration will increase dramatically (14.6% growth in 2014), growing more than twice as fast as spending on health care itself. For comparison, spending on hospital care is expected to grow by 7.2 percent and physician and clinical services by 8.9 percent. (It is also worth noting that the increase in spending on bureaucracy is 16.2 times greater than the nation’s anticipated population growth).

Increasing Insurance Premiums: According to the report, “out-of-pocket” spending [on health care] is projected to decline by 1.3 percent as the number of people with insurance coverage increases and many services formerly paid for “out of pocket” are now covered by insurance. But this is not good news. Reducing “co-pays” and other “out-of-pocket” costs does not make health care less expensive. It simply shifts the cost burden from the consumer to either taxpayers or other insured patients while hiding the true cost of care. This kind of shift is not without costs, as it will: reduce incentives for patients to seek less expensive alternatives; make the health care system less transparent; and lead to more expensive health insurance.

Spending on Prescriptions: Spending on prescription drugs in 2014 will increase 5.1 percentage points higher than they would without the PPACA. The analysis reveals that increased demand will result from lower “out-of-pocket” requirements for prescription drugs. As with other health care services, reducing “out-of-pocket” costs eliminates consumer incentives to demand more cost-effective care, such as asking their doctor for generic alternatives.

Cost of Care: Spending for physician and clinical services will also grow faster than in the absence of PPACA (by 3.1 percentage points higher) as will spending on hospital care (1.0 percentage point higher). This increase in demand has the potential to strain the health care system and create longer waits to see a physician because the increased demand will occur without a corresponding increase (and perhaps even a decrease) in the number of doctors and other health care providers.

The chart from Health Affairs' analysis is below:
  
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