December 3, 2013

Among the GOP's many criticisms of the Affordable Care Act, one of the chief complaints has centered around cost. But according to a new report, Obamacare won't be nearly as costly as expected.

The New York Times reported on Tuesday that "the government is expected to spend billions of dollars less than originally projected on the law."

The adjusted estimate is a result of the law's Medicaid expansion and the subsidies for private insurance plans proving less costly than initially anticipated. According to the Times, economists say that the law has also benefited from a weak economy over the last half-decade, as health care spending dramatically slowed during this time.

It remains unclear if Obamacare's cost-control mechanisms will work effectively when the economy improves and health spending rises once again:

"Whether such improvements will last depends on whether private firms — nudged along by Washington — create and retain incentives to keep spending low.

“In the past five decades, there are only two periods when we’ve been able to sustain low excess health care cost growth for an extended period,” Mr. Levitt, of the Kaiser foundation, said, referring to the current trend and a period in the 1990s, when the Clinton administration tried and failed at overhauling the health care system. “There was a sense in the system: ‘Something is coming, and we need to get ready for it.’ ”

This time may be more durable. Insurance and hospital executives in Massachusetts, Illinois and California, among other places where reforms have gone the furthest, report a consensus that spending growth had become unsustainable, and that expectations that Washington would force changes to the system spurred them to make changes themselves.

Whatever the reasons, the overall slowdown in health costs has led to lower 2014 insurance premiums than analysts anticipated. That means not only cheaper plans for many consumers, but significant savings for the government."

Indeed, whatever the reasons, taxpayers appear set to reap the benefits as the Congressional Budget Office "has quietly erased hundreds of billions of dollars from its projections. It now estimates that Medicare spending in 2020 will be $137 billion lower than it thought in 2010, a drop of 15 percent; Medicaid spending will be $85 billion, or 16 percent, lower; and private health insurance premiums are expected to be about 9 percent lower."

A study from the Center for American Progress in October found similar results: "that an average individual premium for a plan with relatively high out-of-pocket expenses in the insurance marketplaces is $3,900, about 16 percent lower than the $4,700 expected. If those savings were to stick, the Affordable Care Act would cost about $190 billion less than expected over the course of a decade, the center estimated."

Meanwhile, consumers are reporting good news on the front, signing up and saying things like "It’s so exciting to get better insurance at a lower price." In other words, the message that Republicans fear the most.

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