President Obama promised to address the growing costs in health care with passage of his “reform” bill. But instead of reducing costs, Obamacare will succeed only at shifting the burden to taxpayers and the privately insured. Americans with private health insurance will indirectly subsidize care received by those reliant on Medicare and Medicaid. It is for this reason that for many Americans, Obamacare will actually cause medical costs to rise. Some reform, right.
A recent study by PricewaterhouseCoopers predicts that the rate of growth in medical costs will slow to 9.0% in 2011, down from 9.5% in 2010. However, this good news is tempered by the complexity of the responsible factors, a combination of inflators and deflators. Medical costs will decrease as consumers of health care make more responsible decisions, due to greater use of consumer-driven health plans, as generic drugs gain more market share, and as government subsidies for COBRA, enacted as part of the stimulus, expire.
On the flip side, costs will grow due to consolidation of health care providers, mandated investment in electronic health record systems, and cost-shifting on the part of health care providers from Medicare patients to privately insured patients.
It is the last of these, cost shift, which will be most worrisome under Obamacare. As the PwC study highlight, “cost-shifting was identified as the number one reason for the medical trend pushing higher in 2011.” Cost-shifting occurs when hospitals and doctors receive reimbursement rates from Medicare and Medicaid that are lower than the cost of providing care. To break even, doctors compensate for these unpaid costs by increasing how much they charge other patients.
This effect is only going to get worse under Obamacare, which will make drastic cuts to Medicare payments for hospitals and other care providers. And though Congress just passed a temporary “doc fix” to keep painful cuts to Medicare doctors from going into effect, after the short-term “fix” expires, docs can expect to fight again to ward off reductions, this time of 26.2 percent of current reimbursement.
Then there’s the expansion of Medicaid, which pays providers even less than Medicare. Obamacare extends this low-quality, poorly-functioning entitlement to an additional 40 percent of its current enrollment.
Remember, more enrollees and lower payments in government programs directly translate to higher costs for everyone else. Care providers will be left with a choice, shift costs to private payers, or go out of business. Medicare’s Chief Actuary predicts that fifteen percent of hospitals that serve Medicare patients could face going out of business because of reimbursement cuts.
Obamacare increases inflation of medical costs for private payers by expanding government programs and reducing payment rates. Just another reason for Americans to wonder if perhaps they would’ve been better off without the president’s vision of health care reform.
Joshua Wade is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm
