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  • Obamacare Bends the Cost Curve Up: Here Is How to Bend It Down

    President Obama often says that bending the curve in health spending downward is one of the main objectives of his health care reform agenda. There is indeed a consensus that health costs are growing at a rapid rate, and that reformers should work to slow the rising tide of spending.

    But as Heritage’s Robert A. Book, Ph.D, and Jason D. Fodeman, M.D. point out, the big picture is not so simple. In order to successfully reduce health care spending, legislators must address what is causing expenses to rise in the first place. The big House and Senate bills are based on faulty assumptions.

    According to Book and Fodeman, “The House and Senate bills appear to be based on a fundamental misunderstanding of the basic factors driving health care spending upward. As a result, instead of restraining these basic factors, the bills neglect some and reinforce others, driving spending upwards instead of downward.”

    Book and Fodeman break down the drivers of health spending, explaining that increased spending can be due to negative factors or positive factors, such as advances in medical technology or new treatments for previously incurable diseases. Furthermore, increased spending can also be caused by higher prevalence of disease. It is not enough to look at overall health spending and declare it excessive; rather, reformers must focus on areas where spending does not reflect the value of care received by the patient.

    Several factors lead to increased health spending: disease prevalence, increase in insurance coverage, new medical technology, and waste. All increase health spending, with varied effects on actual health of the patient.

    But, as Book and Fodeman note, all of these increases take place within a distorted health care market, driven by misaligned economic incentives. Since 1965, “third-party payments increased from 48 percent to 85 percent”. Third party payers, they argue, “may appear to have an incentive to encourage efficient use of resources, but ultimately they do not pay the price for inefficiency.” Patients, doctors, and insurers alike are thus insulated from the direct effects of increased spending; patients and taxpayers ultimately experience the pain, albeit indirectly.

    So will the giant House and Senate health bills succeed in bending the cost curve downward? No. Limits on out-of-pocket spending, mandates requiring coverage for a greater number of services, and the Senate bill’s excise tax on high-cost insurance plans would all increase overall health spending and health plan premiums in the private sector. This is in addition to massive increases in government spending on health care.

    To reduce health spending, lawmakers should reform Medicare, Medicaid, and tax law regarding health insurance. Finally, Congress should create a true national insurance market and change regulations to promote choice and reward cost-efficient care. Loading new mandates, taxes, and regulations onto patients, doctors, and insurers, as the House and Senate bills would do, will only exacerbate current health spending increases.

    Posted in Obamacare [slideshow_deploy]

    11 Responses to Obamacare Bends the Cost Curve Up: Here Is How to Bend It Down

    1. Amy Clay, Tyler, TX says:

      A good place to check out more information on the healthcare issue is http://www.VoteNoOrYouGo.com.

    2. Bobbie Jay says:

      Time to debate the government on the constitution to give us their misunderstanding of it, so WE THE PEOPLE can explain the truth, meaning and their duties as written and expected to be known by those that take the oath of office.

      No expiration, as the American Constitution is written to build the human qualities of all mankind throughout history of mankind. Amendments with bias, ONLY WEAKENS MANKIND!

      Get out of our health care, get out of our lives.

      FREE MARKETS KEEPS MANKIND FREE!

    3. ChristineWithRegence says:

      None of the health care reform ideas does enough to control overall costs. Why don't we ever know the costs of health care procedures and treatments? I got a kick out of this fun, short video. Check it out.
      http://www.whatstherealcost.org/45secondstoshare

    4. Harry, Illinois says:

      Government has proven time and time again that they are incapable of successfully implementing, managing and overseeing any government run program when it comes to the public interest. Mr. Obama even admitted as much when he made reference to the US Post Office, whom by the way I feel does a pretty decent job in handling our everyday mail.

      If you want to implement a National Health Care Program, it has to be handled on a State by State basis of Private Non-Profit Groups consisting of qualified Doctors, Pharmacy experts Hospital and Insurance Executives from around the Country etc. Big Business works best when they work together. Government does not.

      The Health Care of our Nation is just to big to allow a new Big Government Agency consisting of non-qualified and unsympathetic personnel who would be paid enormous sums of money and benefits to mismanage the everyday health problems that contiue to plague us as a nation.

      I would imagine a significant number of private jobs on a State by State basis could be created by putting people currently pursuing medical degrees to help solve the everyday challenges for implementing sensible and affordable Health Care programs for future generations without costing the tax payers a fortune.

      Just a suggestion to a problem rather then a criticism of what is wrong. If the majority of citizens don't want Government Run Health Care then lets join together to offer our suggestions on how to make a better program that works rather than counting on our representatives who cannot get along to solve the problem on a non-partisan basis. The Government only wants control of the system, so they can tax at will whenever the program starts to go under.

    5. James Nells says:

      The health care insurers made over $12 billion last year. I haven't the slightest idea why conservatives feel pity for these institutions. They are not bastions of free markets. The health care insurance industry is governed by states so that they may avoid competition. And why would they do this? Because corporate greed is much like human nature in that they prey on the week, the needy, the scared, and the ill informed. Trust nobody. Not your government but least of all these corporations. They are beholden to one group of people (stock holders). At least the leaders of our country require our approval to get reelected.

    6. Mary, Cleveland says:

      And just think how much money the government made off the $12 billion from the taxes.

    7. Steve, Pleasanton says:

      If the government gets into the insurance business, who will arbitrate disagreements and ensure that contracted services are provided. Will the menu of services provided by government insurance change? Of course, and who will ensure that the change doesn't hurt the consumer. Right now, the government is the arbitor, I'd like to know who it will be when the government violates insurance agreements.

    8. Mike in St. Louis says:

      The insurance industry has a special statutory exemption from the antitrust laws in the 1945 McCarran-Ferguson Act. Congress needs to pass S.1681 – Health Insurance Industry Antitrust Enforcement Act of 2009 This Act repeals the insurance industry exemption for the most egregious forms of antitrust violations – price fixing, bid rigging, and market allocations. Insurers should be subject to the same antitrust laws as everyone else.

      We need increased competition accross State lines to prevent the the excessive profits in the insurance industry & drive down medical cost.

      We need to increase the supply side. This means encourage more students to enrole into medical school instead of allowing the AMA trade union to restrict enrolement to keep doctors fees & medical cost high for their members.

      Congressional Budget Office Says Preventive Care Will Raise Medical Cost, Not Cut Costs.

      The Obamacare bill H.R.3200 says the public option is not optional. Once your enroled you can't leave. This will cause private insurance pools to shrink until that company goes out of business forcing everyone onto the option-less government plan. I would at least like the option to provide my own health care.

      10 (1) LIMITATION ON NEW ENROLLMENT.—

      11 (A) IN GENERAL.—Except as provided in

      12 this paragraph, the individual health insurance

      13 issuer offering such coverage does not enroll

      14 any individual in such coverage if the first

      15 effective date of coverage is on or after the first

      16 day of Y1.

      Like the AMA, SEIU is largely a medical trade union who wrote Obamacare H.R.3200. Obama is the SEIU union boss negotiating their pay contract with the US citizens. These unions will pay lower premiums & get more benefits than the average citizen under Obamacare. "SEIU's Agenda is My Agenda!!!" said Obama "Together we had fought to raise wages for home care workers in Illinois." SEIU Employees are getting a Big Raise with Obamacare.

    9. Mike in St. Louis says:

      The biggest problem is Obamacare will tax you for 4 years while you get no coverage. You will still be paying for your own health care at the same time. This means your cost will double. Do you trust there will be money left for your care in 5 years, because there is a huge out of control deficit that will swallow that money up & when that 5th year comes around after the Presidential election has happened, he will say we just can't afford this unless we raise taxes. DON'T BE A SUCKER!!! You saw what happened to the Social Security Surplus didn't you.

    10. Pingback: Stargate SG1, The GOP, and Health Care. « DouglasernstYLP

    11. Pingback: More Proof… - Obamacare Fail

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