in Obamacare’s Secret Success he tells us that despite the problems and complaints it is working in one key regard, holding down the growth of medical spending, or as it has been described, bending the curve of the expansion of spending.
In one sense this should not have been a surprise, despite the conventional wisdom in Washington, in which the thinking is skewed:
The prevalent attitude in Washington is that reform isn’t real unless the little people suffer; serious savings are supposed to come from things like raising the Medicare age (which the Congressional Budget Office recently concluded would, in fact, hardly save any money) and throwing millions of Americans off Medicaid. True, a 2011 letter signed by hundreds of health and labor economists pointed out that “the Affordable Care Act contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending.” But such expert views were largely ignored.So Krugman asked who was right, has in fact, the curve been bent, and answers
The answer, amazingly, is yes. In fact,the slowdown in health costs has been dramatic.There is more to the story.
Krugman examines possible reasons for the slowdown, the bending of the curve.
For those who think it might simply be the depressed economy, Krugman points out that the economy had largely recovered by 2010, the period when the slowdown begins, so that cannot be the explanation - and I am quite sure that he is aware that not everyone felt the recovery, but that does not affect the analysis. After all, it is hard to explain that as a reason for slower inflation in medical spending than in the rest of the economy, and it offers no explanation for why Medicare had an even more dramatic slowing than the rest of the economy.
Nor does the fact that there has been a slowing of medical innovation account for it - yes, there have been fewer blockbuster drugs, and existing drugs continue to go off-patent and get replaced by cheaper generics, which explains why the Part D programs costs have been less than projected,
But since drugs are only about 10 percent of health spending, it can only explain so much.The biggest single reason?
So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act’s reduction in Medicare “overpayments” — mainly a reduction in the subsidies to private insurers offering Medicare Advantage Plans, but also cuts in some provider payments. A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patients end up being readmitted soon after being released — an indicator of poor care — and readmission rates have, in fact, fallen substantially. Medicare is also encouraging a shift from fee-for-service, in which doctors and hospitals get paid by the procedure, to “accountable care,” in which health organizations get rewarded for overall success in improving care while controlling costs.Let's stop on this point for a moment and remind ourselves of a point that Krugman does not mention. Some Republicans demagogue PPACA claiming that it "stole" hundreds of billions from Medicare to fund Obamacare, a point that when Rep Bachmann made it in a Republican primary debate, Politifact rated it "Mostly False". Demagoguery can be effective - remember "Death Panels?" - even when patently false. That is one reason this Krugman column is so important.
Furthermore, there’s evidence that Medicare savings “spill over” to the rest of the health care system — that when Medicare manages to slow cost growth, private insurance gets cheaper, too.
But Krugman has MUCH MORE to offer. Savings will get MUCH BIGGER:
The Independent Payment Advisory Board, a panel with the power to impose cost-saving measures (subject to Congressional overrides) if Medicare spending grows above target, hasn’t yet been established, in part because of the near-certainty that any appointments to the board would be filibustered by Republicans yelling about “death panels.” Now that the filibuster has been reformed, the board can come into being.Yet another could reason for Harry Reid and the Senate Democrats to have gone nuclear.
But wait, there is still more, as the pitchman on late-night TV used to say.
Consider Krugman's final paragraph:
The news on health costs is, in short, remarkably good. You won’t hear much about this good news until and unless the Obamacare website gets fixed. But under the surface, health reform is starting to look like a bigger success than even its most ardent advocates expected.Let's repeat the key words: health reform is starting to look like a bigger success than even its most ardent advocates expected.
Not only are people who could not afford it now getting good coverage, but the plan is lowering costs as the experts predicted, and when fully implemented will save even more.
Which, by the way, nicely undercuts the rhetoric of those who continue to insist upon the necessity of cutting the social safety net as part of some kind of "grand bargain" to "save" the economy from the exploding costs that are supposed to crush us.
This is a very good, and detailed Krugman column.
Pass it on.