December 12, 2016

How the Affordable Care Act Failed

Mark J. Warshawsky

Former Senior Research Fellow

These recent statistics are highly damaging to the original and reasonable motivation for the Affordable Care Act – to bend the health care spending and cost curve downwards. In fact, we now seem to be going in the opposite direction, perhaps because the extra tens of billions of dollars being expended by the federal government on health care are adding fuel to the fire.

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The main motivation for the Affordable Care Act initially stated by President Barack Obama was to "bend the curve": to slow the rapid growth in health care spending that the United States has experienced for the last several decades. Subsequently, the stated primary motivation for the law has shifted to increasing insurance coverage, but the White House (mainly through its Council of Economic Advisers) has still tried to claim in the last couple of years that it has been having a favorable effect on slowing the growth of health care spending and prices. Indeed, this latter policy reason has always been the more sensible one for health reform on political and economic grounds.

The vast majority of Americans have always been well covered by health insurance – either through their employer or the government – and those who were not covered were either eligible for coverage (e.g., through Medicaid or individual insurance) but opted out, or got medical treatment through out-of-pocket payment, charity care or other means. But the rapidly rising cost of health insurance and health care has increasingly and severely impinged upon all working households, retirees, businesses and governments – lowering labor earnings, hitting middle-class workers particularly hard, increasing inequality, reducing spendable resources, increasing government deficits, and crowding out other government spending, while having uncertain benefits, at the margin, of improving health outcomes.

Therefore it is worth examining whether the Affordable Care Act is succeeding according to the original and still relevant assertions of its designers and advocates. Recent data gives a strongly negative answer.

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