ObamaCare Ills are Mounting

By SBE Council at 22 May, 2014, 7:36 pm

by Raymond J. Keating-

During the debate over ObamaCare, President Obama and supporters made a lot of promises in their efforts to pass the Affordable Care Act. The big claims were that health care costs and spending would decline, and the government’s fiscal health would be improved. Consumers would be able to keep their insurance plans if they liked them. For small businesses, ObamaCare would rescue entrepreneurs from high costs and a lack of choices.

President Obama and the supporters of his health care plan made a lot of big promises to a very skeptical public when they made the final push to get it through Congress. ObamaCare is not living up to those promises.

The actual economics of ObamaCare were glaringly obvious, and the exact opposite of what the President and his allies asserted. That is, increased government regulation and mandates, higher taxes, and more government spending on health care coverage and services would inevitably lead to increased health care costs and bigger government. While there’s no real economic debate over these points, wrongheaded politics and politicians often speak louder than sound economics.

The real-world economics of ObamaCare should now be clear even to the most strident advocates for more government in health care.

Small Business Costs Continue to Increase and Will Go Higher. Things are not and will not improve for small businesses, as asserted by ObamaCare advocates. For example, the Office of the Actuary for the Centers for Medicare & Medicaid Services published an analysis in February concluding that 65 percent of small businesses that offer health insurance coverage will experience increased premiums due to ObamaCare.

Companies will Drop Coverage. Large firms also will be incentivized to drop coverage in order to save money. As noted by Sally Pipes in a recent Forbes column: “Employer-provided health insurance may not be long for this world. According to a new report from S&P Capital IQ, 90 percent of American workers who receive health insurance from large companies will instead get coverage through Obamacare’s exchanges by 2020. For that, patients — many of whom no doubt like the insurance they currently have — can blame Obamacare. The law’s many mandates, fees, and taxes will increase health costs for large employers to the point that providing health benefits at work is financially unsustainable.”

ObamaCare Mandates and Regulations are Pricey. In a March column at Forbes.com, Scott Gottlieb summed up key problems with the economic of ObamaCare this way: “At issue are provisions in Obamacare that force every health plan sold in America to conform to a litany of new Federal mandates and regulations. Even many quality health plans didn’t meet all the new criteria, which require insurers to cover a long menu of medical services that many consumers neither want coverage for, nor need. Accommodating all of the new mandates is a pricey affair. It forces insurers to push up premiums, or make up for the costs in other ways – mostly by cheapening the networks of doctors they offer, or the drugs they will cover. In response, many insurers are canceling old plans that don’t meet the new rules, and rolling consumers onto new but costlier policies. In other cases, insurers are steering customers to the Obamacare exchanges, where people can get government subsidies to offset some of the new costs.”

A Boost to Federal Spending, Debt and Deficits. For good measure, a February CBO report predicted increased federal spending and debt due, in part, to the impact of ObamaCare. That is, projected rising federal deficits after 2015 are tied to spending “boosted by the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary, and mounting interest costs on federal debt.”

Impact on the economy and jobs is negative. The following was noted in a May 5 updated report from the NFIB Research Foundation: “The 2010 healthcare law contains a tax on the health insurance policies that most small businesses purchase. Although the tax is formally structured as a fee on health insurers, analysis has determined that virtually all of the tax burden will be passed on to the purchasers of insurance: employers and employees. Estimates predict the tax will raise the cost of employer-sponsored insurance by 2% – 3%, imposing a cumulative cost of nearly $5,000 per family by 2020. The NFIB Research Foundation’s BSIM model suggests that such price increases will reduce private sector employment by 152,000 to 286,000 jobs in 2023, with approximately 57 percent of those losses falling on small business.”

Keep in mind, that’s the impact of just one tax included in ObamaCare, not all of the taxes, regulations and mandates imposed.

And what about the impact on the costs of particular services?

Drugs costs higher. Consider a new study done by Millman Inc. for the Pharmaceutical Research and Manufacturers of America (PhRMA) that compared “common health care benefit designs offered to individuals through the Exchanges and typical employer-sponsored plans.” It was found: “Silver plans with combined deductibles impose significantly higher member cost sharing for pharmacy benefits than a typical employer-sponsored plan (130% higher).” That is, pharmaceutical costs for consumers will be notably higher under ObamaCare.

And, Finally, Health Care Spending will Rise to Record Levels. When President Obama ran for president and peddled his ideas on health care, one of the big excuses for going down this path was that health care spending as a share of the economy was just too big. In 2008, according to the Office of the Actuary for the Centers for Medicare & Medicaid Services, national health care expenditures came in at 16.4 percent of GDP. It then rose to 17.4 percent in both 2009 and 2010, falling back to 17.3 percent in 2011 and 17.2 percent in 2012. However, looking ahead, as ObamaCare takes hold, health care expenditures as a share of GDP are expected to rise, reaching record levels, and hitting 19.9 percent of GDP in 2022.

So, on all accounts, ObamaCare has been and will be a failure, especially compared to what its supporters had predicted.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s new book, published by SBE Council, is titled Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship. It’s available from Amazon.com here.