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New Study Shows Higher Health Care Costs under Obamacare

Posted By Margot Crouch On May 26, 2011 @ 12:00 pm In Obamacare | Comments Disabled

Despite President Obama’s assurances that his massive overhaul of the health care system would control health care costs and allow Americans to keep their current coverage, the outlook indicates otherwise. PricewaterhouseCoopers (PWC) recently released its annual report [1] on medical cost trends for 2012, and it is revealing.

The report shows health care costs and premiums continuing to rise—and uncertainty increasing for employers who offer insurance to their workers. Health care spending increased by 7.5 percent in 2010 and will grow by 8 percent this year. In 2012, it will rise again by 8.5 percent. This is exactly the opposite [2] of the President’s promise that his health care plan would reduce premiums [3] by $2,500 per person.

Even steeper rises in the cost of private insurance are possible, due to Obamacare’s reductions in Medicare payment rates and its expansion of the Medicaid program. PWC writes, “Hospitals and health plan executives agree that when Medicare and Medicaid pay less than costs, private payers must make up the difference.” The new law will cut provider payment rates across the board, which Medicare’s Chief Actuary warns could cause 15 percent of hospitals, skilled nursing facilities, and home health agencies to become unprofitable by 2019. As more Americans enroll in Medicaid in place of other forms of coverage, providers will face lower reimbursement for a greater number of patients. According to the report, the impact of these changes will likely mean greater cost-shifting to privately insured patients—indirectly increasing premiums.

Perhaps most concerning are the findings of a survey [4] also released by PWC divulging how employers are likely to react to Obamacare. The responses do not bode well for Americans who receive insurance through their employers, and things look even worse for taxpayers. The survey showed that nearly half of employers will drop their coverage, dumping employees into the government-run exchanges. Individuals who qualify would then receive generous federal subsidies to purchase insurance. If more employers than expected dump coverage, as other experts have predicted [5], the cost of the subsidy program will explode deficit spending. The results of the PWC survey indicate this is likely to be reality.

Even if employers do not dump coverage entirely under the new law, according to the survey, five out of six employers will completely re-evaluate their benefits strategy. Four out of five employers will make changes to help cover new costs under Obamacare, including raising premiums, deductibles, and co-payments.

Employers who offer coverage to their workers face growing uncertainty regarding costs under the new law. The negative consequences of Obamacare’s changes will be threefold: higher costs [6] for those with employer-sponsored coverage; a greater debt burden [7] on current and future taxpayers; and slower growth [8] in job creation and the overall economy.

Co-authored by Kate Nix


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/05/26/new-study-shows-higher-health-care-costs-under-obamacare/

URLs in this post:

[1] its annual report: http://pwchealth.com/cgi-local/hregister.cgi?link=reg/behind-the-numbers-medical-cost-trends-2012.pdf

[2] exactly the opposite: http://blog.heritage.org../2010/07/29/side-effects-premium-hikes-for-arizona-state-employees-courtesy-of-obamacare/

[3] reduce premiums: http://www.heritage.org/research/reports/2010/09/obamacare-increases-health-insurance-premiums

[4] a survey: http://www.pwc.com/en_US/us/hr-management/assets/PwC_2011_Health_and_Wellbeing_Touchstone_Survey_Results.pdf

[5] as other experts have predicted: http://americanactionforum.org/files/LaborMktsHCRAAF5-27-10.pdf

[6] higher costs: http://www.heritage.org/Research/Reports/2010/09/Obamacare-Increases-Health-Insurance-Premiums

[7] greater debt burden: http://www.heritage.org/Research/Reports/2011/01/Obamacare-and-the-Budget-Playing-Games-with-Numbers

[8] slower growth: http://www.heritage.org/Research/Reports/2011/01/Obamacare-and-the-Employer-Mandate-Cutting-Jobs-and-Wages

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