In today’s speech on the economy, President Obama devoted an extended section to Obamacare and health care, a topic he generally hasn’t been eager to discuss since the law took effect. He had two pieces of good news: The number of Americans who lack health insurance is dropping, and health care and health insurance isn’t costing as much as we expected. He’s right about the first part, and it can probably be attributed to the Affordable Care Act: The uninsured rate is dropping, thanks in large part to the law’s Medicaid expansion, though how much, we’re not sure. (And, of course, the economy is improving, and the drop in uninusred looks to be noticeably less than the Congressional Budget Office predicted the law’s effects to be.)
The much more problematic claim is that Obamacare is holding down the cost of health insurance. Here’s his first claim:
If your family gets your health care through your employer, premiums are rising at a rate tied for the lowest on record. What this means for the economy is staggering. If we hadn’t taken this on, and premiums had kept growing at the rate they did in the last decade, the average premium for family coverage today would be $1,800 higher than they are. That’s $1,800 you don’t have to pay out of our pocket or see vanish from your paycheck. That’s like a $1,800 tax cut.
First, this is only like an $1,800 tax cut if you expect your taxes to rise, say, 8 to 10 percent a year, as health insurance premiums often do — Americans are not seeing premiums drop for comparable employer health plans. Premiums have risen relatively slowly for employer plans over the past couple years, but there’s almost no way the president can possibly claim credit for this. The Affordable Care Act didn’t “take on” employer health insurance at all, really — it only made small, relatively inexpensive tweaks to that market (such as the HHS mandate). Employer premiums are rising slowly for a couple reasons: the overall health-cost slowdown and the continued shift to high-deductible, health-savings-account plans. The latter is due in large part to President Bush’s Medicare Modernization Act of 2003, which made such savings accounts much more feasible. (Obamacare’s ”Cadillac tax” will also drive the growth of these plans in the future — he does deserve credit for that.)
What about that overall cost slowdown? It’s also almost impossible to attribute it to Obamacare, and other factors are probably driving it, not least the bad economy. Obamacare could slow down costs in the future, but the law has barely been implemented. Meanwhile, health-care-cost growth has slowed across the entire wealthy world, mostly because of the recession, and growth started slowing in the United States in the mid 2000s. This has shown up most obviously in Medicare, which makes up a huge part of our health-care system. In a column on “the Medicare miralce,” Paul Krugman was eager to attribute some of the slowdown to Obamacare, but Vox’s Sarah Kliff, writing for an outlet not exactly hostile to the president, explains that there are other factors going on, and any connection to Obamacare is quite speculative.
President Obama was careful in his discussion of Medicare, though he’s still putting it next to unjustified claims about his law and the cost slowdown:
Partly because health-care prices have been growing at the slowest rate in nearly half a century, the growth in what health care costs the government is down, too. The independent, nonpartisan Congressional Budget Office recently reported that in 2020, Medicare and Medicaid will cost us $188 billion less than projected just four years ago. Here’s what that means in layman’s terms. Health care has long been the single biggest driver of America’s future deficits. Health care is now the single biggest factor driving those deficits down.
This isn’t a very good layman’s explanation. Health-care is still the single biggest factor driving America’s future deficits — ignoring interest, it’s not even close. What’s really happening: When you look at what we projected for future deficits several years ago, and what we’re projecting now, the single biggest improvement in that picture is due to slower health-cost growth. But it’s still health-cost growth that’s expected to generate the deficits, and we don’t know whether Obamacare is going to help in that regard. Few listeners of the president’s speech would understand that.
The president also noted that rates for Obamacare insurance in some places are actually falling next year: This is based on on report, from the Kaiser Family Foundation, that premiums for “silver plans” are on average falling in the 16 cities where they could get data. Kaiser VP Larry Levitt, as Obama noted, really did say it’s “like defying the laws of physics.” I’m not quite as surprised: Premiums shot up across the individual market in 2013, and insurers are now eager to keep people on their plans, since they’re protected from significant losses for the next couple years by the way Obamacare is designed. If putting American taxpayers on the hook to hold premiums down for a small number of insurance enrollees and to protect insurance-company profits, and canceling tens of thousands of more insurance plans, is “progress” the president “can be proud of,” well, okay.
And apparently the president couldn’t resist one more slippery reference to Obamacare. Describing the sharp reduction in current annual deficits over the past few years, he said:
Between a growing economy, spending cuts, health reform, and asking the wealthiest Americans to pay a little more, over the past five years, we have cut our deficits by more than half. When I took office, the deficit was nearly 10% of our economy. Today, it’s approaching 3%. In other words, we can shore up America’s long-term finances without falling back into the mindless austerity or manufactured crises that dominated Washington budget debates for too long.
He’s right about the numbers, and all the causes except one: “Health reform” is an interesting way to describe how the ACA has affected the deficit so far. The Congressional Budget Office projected that it would cut the deficit by billions in 2012, 2013, and 2014 (estimates have not changed dramatically since then), but that’s not because of the reforms it made. The deficit reduction in the ACA during that time was entirely tax increases — which have not, by the way, fallen only on “the wealthiest Americans.” A couple of the tax hikes were targeted at the wealthy, but an excise tax on medical devices, multiple kinds of taxes on heath insurance, and the individual mandate are not targeted at the wealthy.
And his conclusion from this is simply illogical: The dropping deficit, he says, shows how we can improve our long-term finances without “mindless austerity or manufactured crises.” I’d like to think so, too, but the factors he identified — besides the growing economy — were all the product of (more or less) mindless austerity or congressional crises. I don’t like that any more than the president, but it’s nonsense for him to claim that the improving budget picture shows a way forward. (Unless he just wants to cut the deficit by focusing on growth exclusively — I don’t expect him to propose that anytime soon.)