From my latest Washington Times column:
After a three-month delay, the trustees of the Social Security and Medicare trust funds have finally published their annual report. Now we have an explanation for the wait. Thanks to program changes made by the Affordable Care Act (aka Obamacare), the report summary says, “The outlook for Medicare has improved substantially.”
The Hospital Insurance Trust Fund, expected only last year to run out of money in 2017, is now expected to remain solvent until 2029, says the report. What is responsible for this 12-year lease on life? Another document, released by the Center for Medicare and Medicaid Services earlier this week, fills in the details: Reforms to the health care delivery system will shave government spending by $575 billion over the next 10 years, and trillions of dollars more in the following decades. To use the jargon of the health care wonks, Obamacare will “bend the cost curve down” – from 6.8 percent annual increases in Medicare spending, as projected previously, to a more fiscally sustainable 5.3 percent.
In Obamaworld, those gains will not come from health care rationing, as Republicans fear, but by transforming the health care system from a fee-for-service model that encourages wasteful spending into a system that rewards hospitals and doctors for economic efficiency and improved quality.
Alas, the Obama administration is living in never-never land. The positive components of Obamacare – and there are several – may have a beneficial effect, but they will be swamped by the bureaucratic nature of the legislation. The Medicare budget deficit will turn out far worse than the Obama team imagines. Read more.
Update: In retrospect, I realize that I don’t make the argument in the Times column as strongly as I could have. I spent too much space articulating the Obama administration’s thinking behind Obamacare (bending over backwards to be fair and balanced), and not enough space to explaining how the legislation actually undermines the intent. As I explained in my Boomergeddon blog post, “Where Are the Health Entrepreneurs?” (warning, none of this will make much sense until you finish reading the Times column):
There is one critical element that Cutler, a key architect of Obamacare, left out: The number one reason there is so little innovation in new health care delivery systems is that the key established players in the system — hospitals, insurers and doctors — have utilized their political power to entrench their positions in the medical marketplace and ward off competition. For all practical purposes, independent entrepreneurs are prevented from devising new models for delivering health care.
That’s why Obamacare is not the answer. Although the Affordable Care Act does set up mechanisms to fill the information void on medical outcomes, and it aims to change the incentives to reward efficiency, rather than punish it as the current fee-for-service system does, it also protects the big insurers and hospitals against competition from entrepreneurs, and it does nothing — indeed, in practice, it discourages — patient/consumers from taking more ownership of their health care purchases.
