State of the Union fact-check: Is PPACA slowing health care cost growth?

Although health care in general and the Patient Protection and Affordable Care Act specifically were but a footnote in Tuesday night’s State of the Union address, President Obama may have raised eyebrows when he claimed that “already, the Affordable Care Act is helping to slow the growth of health care costs.” After examining the numbers and speaking to one health care expert, EBN finds that the president’s claim is not so cut and dried.

In 2011, the first year after PPACA was enacted, health care spending did indeed grow at its slowest level in 52 years, 3.9% to $2.7 trillion, according to the Centers for Medicare and Medicaid Services. This slide is not likely related to PPACA, however, as the decline began in 2008. In fact, lower spending is largely the result of increased cost-shifting to consumers and decreased state government assistance.  Before the recession, annual growth was around 8%.

Further, a separate CMS report projects that even after PPACA is fully implemented, U.S. health spending is expected to reach nearly $4.6 trillion by 2019, growing at an average annual rate over the next decade of 6.3%, as opposed to a 6.1% rate anticipated before reform.

By 2019, health care is predicted to account for nearly one of every five U.S. dollars spent or about 19.6% of the gross domestic product, 0.3 percentage points higher than projected previously, CMS economists concluded.

“In the aggregate, it appears that the Affordable Care Act will have a moderate effect on health spending growth rates and the health care share of the economy,” said CMS economist Andrea Sisko.

Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute, tells EBN that while, statistically speaking, health care costs are indeed growing at a slower rate, “I don’t know that it can be directly attributed to health care reform. The law has so many moving pieces, it would be really hard to parse that out.”

He cites Mercer data from November 2012 that “showed premium growth had slowed to its lowest level in 10 years to about 4.1%.” Still, he says, at the same time “wage growth is about 2%, and overall inflation is about 2%.”

“We really haven’t seen a lot — certainly in the employer market — to suggest that [PPACA] is helping to bring costs down,” Fronstin says. “Now, a lot of the changes don’t kick in until next year — like essential health benefits and rating bands — but even with growth rates slowing, we still have a ways to go to close the gap between cost growth and wage growth. And it’s another thing altogether to actually bring costs down, which is what we all want.” 

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