The Committee for a Responsible Federal Budget has crunched those great Obamacare numbers from the
Congressional Budget Office last month, and has figured out that there will be a
$900 billion slowdown in federal health care spending, and it pinpoints where those savings come in.
That big $710 billion chunk in the above graph represents an expected reduction in health spending, compared to previous estimates, because of the slowed growth in health care costs over the last four years. Until about 2010, health care spending grew at a much greater rate than overall economic growth. That's changed, and it's now increasing at about the same rate as the general economy. Exactly why it's slowed so much isn't easy to pinpoint. The great recession and continued economic woes mean people are foregoing health care. But Obamacare has actually played a good part in that.
Buoyed by a 23 percent drop in the cost of Medicare Part D and a 15 percent decline in the projected costs of the Affordable Care Act's (ACA) new coverage through Medicaid and the exchanges, this remarkable slowdown has been a bright spot amidst an otherwise still dim fiscal outlook.
While the slowdown has garnered much attention, much less writing has focused on pinpointing where the downward revisions have occurred. Relative to the size of the program, the largest reduction actually occurred in Medicare Part D, with nearly the largest nominal dollar reduction in spending despite being very small compared to major federal health care programs. This downward revision is in large part due to the broader slowdown in prescription drug costs stemming from the so-called "patent cliff," as a number of widely used, high-cost drugs have come off patent recently. The program's costs have also consistently been revised downward since its implementation.
One of the things this data analysis can do is point the way to where further reforms might be most effective. For example, that Medicare Part D—prescription drug coverage—23 percent reduction is really, really big. Just think what the federal government could save there if it could negotiate drug prices for Medicare like it does for the Veterans Administration.
Even with the expected increase in the rate of health care spending this year—millions of people now gaining insurance and using it will increase spending—the outlook for Obamacare and for health care spending looks pretty good for the next several years, perhaps a decade. That doesn't preclude further reforms, because we're still spending an insane amount of money on health care in this nation, relative to every other developed country on Earth. But it should buoy up policymakers, and encourage them to keep going with the reform.
It also, by the way, is another nail in the Republican's anti-Obamacare coffin. That's always a good thing.
