The American Interest
Analysis by Walter Russell Mead & Staff
Is Obamacare Turning Health Care into a Luxury?

obamacare

American health care spending has significantly slowed down in recent months. Reuters:

In the past week, medical testing companies, such as Quest Diagnostics, medical device makers Johnson & Johnson and Abbott Laboratories, hospital operators, such as HCA Holdings Inc, and even diaper maker Kimberly-Clark, which has a surgical supply unit, have cited a slowdown in use of medical services.

JP Morgan analyst Michael Weinstein, in a research note, said U.S. physician office visits were down 3.3 percent in March from a year ago, after a 3.6 percent decline in February. And HCA on Monday warned about a slowdown in the growth of hospital admissions and weakness in outpatient volumes in the quarter.

The recession is obviously a big driver of this trend. People have less money, so they are consuming less care. But on WaPo’s Wonkblog, Sarah Kliff argues Obamacare is also a factor. She argues that an ACA-driven slowdown could save the health care system as much as $2 trillion over the next decade.

So how exactly is the new health reform reducing costs? She quotes Larry Levitt of the Kaiser Family Foundation:

“The run-up to the Affordable Care Act, and the initiatives put in place by the law, are absolutely having an effect,” he says. “I think providers and payers see health reform coming and they want to get ready to lower their costs.”

As an explanation for how Obamacare is slowing down spending, this is seriously weak. The Reuters piece tells a different, more complete story. In anticipation of Obamacare’s implementation, many employers are switching their employees onto plans with high deductibles, which means that the employees will be paying more of their costs out of their own pockets. Employers are making this switch because they expect the ACA to increase costs, and they want to shift as much of this cost onto their workers as possible. As a result, consumers are seeking less care to save themselves some money. Hence the slowdown.

Liberals typically dislike making consumers pay for more of their own treatment on the grounds that it makes people seek less care than they actually need. But now left-leaning outlets like Wonkblog are, even if indirectly, taking a different tack, praising these plans for the savings they produce. This suits us just fine, but we should note that once again Obamacare is gesturing towards good policy but falling short. Individuals spending less on care is good, but not when that’s happening because the cost of care is going up even more.

Consumer price sensitivity is the only way to make the health care system work, but what’s missing is a serious approach to introducing this in ways that aren’t punitive. The idea of high deductible plans is a good one, but Obamacare is only encouraging it indirectly and haphazardly. What we need is a careful, managed transition to a high deductible catastrophic insurance plan that also sets up complementary structures to help lower income Americans afford care.

The details of this, its costs and benefits, would have to be hashed out in a national debate on our system. Unfortunately, we’re nowhere near having that conversation. Obamacare has been one big distraction, a plan with worthy goals but the wrong methods. The sooner we make that U-turn the better.

Published on April 23, 2013 3:15 pm
  • ojfl

    This is the result of these “progressive” proposals. The approach proposed in the article is precisely the approach that the GOP favored in the run up to Obamacare but they did not get the light of day or the media attention.

  • Andrew Allison

    “As a result, consumers are seeking less care to save themselves some money. Hence the slowdown.” I’m shocked, shocked to learn that the fact that they didn’t have to pay for it caused people to seek unnecessary care! Please note the word unnecessary (as opposed to needed).
    This is, of course, part the problem with health insurance. Co-pays and deductibles should be means-tested. Outrageous, but necessary.

  • http://pulse.yahoo.com/_7MHPIFOJRACNS3RBRTZOKTBUMU DavidT

    It is estimated that 80-85% of patients visits to primary care physicians are for self-limiting problems — which will go away without any intervention. On these grounds alone any policy that encourages people to make better judgments about when they need health care and when they don’t will reduce office visits, lower spending, and free up physician time for more serious problems.

    David Taylor, MD

  • lhfry

    It would be nice if Medicare offered a high deductible “true” insurance option. It’s hard to find a gp who will take a new Medicare patient, and unless you are sick and/or visit a doctor frequently, you are often looking for a new gp every year for your annual physical.

  • Lorenz Gude

    When you start with the US health care costing about twice as much as it should as a percentage of GDP trying to add universal health care on top of the existing system is unsustainable. This article is about some minor adjustments and actual further increases in how much people are bing charged. The US spends 16% of GDP now (Australia 8.5% of GDP) and the ACA caps that to 16.5% or 17% by 2017. It should be 10% by 2020. I believe it will take a collapse to fix it.

  • http://www.facebook.com/people/Luke-Lea/579129865 Luke Lea

    Hospitals are one of the few luxury environments poor people have access to. Over the decades I’ve watched hospitals morph from spare, utilitarian structures with green painted walls — remember wards? — to plush, gleaming structures with single-rooms for all. It’s at least partly explained by hospital competition for patients combined with cost-plus insurance reimbursements — which the insurance companies like too because their profits are based on a percentage of gross premiums.