Bill Clinton has joined the ranks of those lying about Obamacare. In a friendly conversation with reporters the other evening, Mr. Clinton extolled the healthcare omnibus for having already dampened rising healthcare prices. He claimed that the bill was responsible for producing “two years in a row of 4 percent inflation in health-care costs. This is the first time in 50 years that health-care costs have gone up so little.” He warned that slaying the Obamacare beast “would let inflation loose again.”
Mr. Clinton is either hoping to make up for his off-the-reservation praise of Mitt Romney’s Bain career, or seriously deluded. The rise in healthcare costs has indeed slowed, but the drop has nothing to do with the Patient Protection and Affordable Care Act.
The most notable feature of that legislation is that it did absolutely nothing to rein in costs. In particular, the bill failed to change the insane “fee for service” model of Medicare, it demanded no “skin in the game” for consumers of healthcare, it did not include tort reform and it did not push health insurers to compete across state lines.
What it did do was recycle dollars out of insurance coffers into consumer pocketbooks, which is a pleasing short-term plus but which in the long term is unsustainable. As long as we have private insurance companies, they will demand a fair return – something the White House does not comprehend.
Mr. Clinton was correct that healthcare inflation has dropped – to roughly 4 percent in each of the past two years. The reasons for that reduction (it had been running reliably above 7 percent) is twofold: the recession and less generous insurance plans have made people more carefully ration their healthcare dollars and prescription drug prices have flattened.
According to a study by the Health Care Cost Institute, inpatient and outpatient services declined in 2010 – for the third year in a row. The group also reported that beneficiaries paid a larger portion of total costs, with insurers picking up 83.8 percent of the tab, down from 84.4 percent.
PricewaterhouseCoopers reported last month that employers are shifting expenses to their employees and that workers are “pursuing low-cost alternatives.” The majority of companies are requiring higher employee contributions – giving the ultimate customer more skin in the game. It is no surprise that consumers, faced with actually paying more of their healthcare costs, are finding ways to save money.
In other words, employer insurance plans are becoming less generous, doubtless in part because the providers have had to cover people with pre-existing conditions and also keep young people on their parents’ plans. So, when President Obama heralds those demands laid down by his healthcare bill, do not forget that someone, somewhere, is picking up the tab. In fact, we are all paying those costs. As in green energy and so many other realms, Mr. Obama believes he has a Magic Wand with which he can make nasty profit motives and economic sense go away. It is not so.
Mr. Clinton (and the president) will no doubt also claim that prescription drug costs have come under control thanks to Obamacare. Thompson Reuters’ healthcare index shows that annual cost increases for prescription drugs have helped lower healthcare inflation since 2007. This welcome slowdown has nothing to do with Obamacare.
Should this abomination of a bill stand, the president will benefit -- along with consumers – from the fact that seven of the world’s twenty most popular drugs have or will soon go “off patent” this year and next and be available as a generic. The list includes Lipitor, a generic substitute for which became available in January, and which was taken daily by nearly nine million Americans last year. Clot-buster Plavix, taken by 50 million, has just gone “off-patent” and several more important drugs will soon be available via generics that typically cost about 20 percent as much as the original medication.
President Clinton also celebrated that “$1.3 billion dollars in insurance refunds have already been paid to businesses and individuals because now the law says 85 percent of your premium has to go to health care and not to profits and promotion.” This is true, but is not sustainable. Insurance companies will figure out a way to pass the cost of compliance along to consumers.
The same holds true for the demand that insurers allow young people to remain on their parents’ plan until they are 26. Young people are relatively cheap to cover; typically their health costs are not high. Again, insurers will find a way to pass these extra costs along to customers – by demanding higher co-pays or in some other way.
There are innovative approaches in the marketplace that are helping rein in healthcare costs. Among them are low-cost clinics supplied by drug chains and wellness programs offered by employers. (Pricewaterhouse says that three in four employers now offer wellness programs, and more than half say they will expand those next year.) Since these approaches emerge from the private sector they have been virtually ignored by a White House enamored with government solutions.
Had President Obama enlisted the country’s employers in a meaningful search for solutions to our burgeoning medical outlays early on, instead of making healthcare a vanity issue, he might have come up with legislation that would not have endangered his presidency and divided the country. And President Clinton would not be required to stoop to defending the undefendable.