True or False: ObamaCare Will Bring Down Medical Costs

| by Reason Foundation

By Peter Suderman

Suppose I were a skeptic of major promises made about last year’s health care overhaul. Now
suppose I were Medicare’s chief actuary. But I repeat myself:

Two of the central promises of President Barack Obama's health care overhaul law are unlikely to be fulfilled, Medicare's independent economic expert told Congress on Wednesday.

The landmark legislation probably won't hold costs down, and it won't let everybody keep their current health insurance if they like it, Chief Actuary Richard Foster told the House Budget Committee. His office is responsible for independent long-range cost estimates.

Foster's assessment came a day after Obama in his State of the Union message told lawmakers that he's open to improvements in the law, but unwilling to rehash the health care debate of the past two years. Republicans want to repeal the landmark legislation that provides coverage to more than 30 million people now uninsured, but lack the votes.

Foster was asked by Rep. Tom McClintock, R-Calif., for a simple true or false response on two of the main assertions made by supporters of the law: that it will bring down unsustainable medical costs and will let people keep their current health insurance if they like it.

On the costs issue, "I would say false, more so than true," Foster responded.
As for people getting to keep their coverage, "not true in all cases."

So those promised cost reductions probably won’t happen under Obama’s plan. Is there perhaps another plan that Foster thinks is more likely to produce such savings? Here’s The Daily Caller’s Jon Ward with the actuary's answer:

[Democratic Rep. Chris] Van Hollen pressed Foster on whether [GOP Rep. Paul] Ryan’s plan [the Roadmap for America’s Future] would work, prompting Foster to point out that one of the biggest problems in health care now is that most new technology that is developed increases costs rather than decreasing it.

“If there’s a way to turn around the mindset for the people who do the research and development … to get them to focus more on cost-reducing tech and less on cost increasing technology, if you can do that then one of biggest components of [increasing costs] turns to your side,” Foster said. “If you can put that pressure on the research and development community, you might have fighting chance of changing the nature of new medical technology in a way that makes lower cost levels possible.”

Foster said: “The Roadmap has that potential. There is some potential for the Affordable Care Act price reductions, though I’m a little less confident about that.”

On the one hand, you have the president’s health care overhaul, which expands on our current unaffordable system of open-ended support for health coverage. It gathers health insurers into heavily regulated, government-run exchanges and which sets up a variety of new mechanisms for holding down costs through increased micromanagement and centralized decision making. Inevitably, those decisions become politicized, and costs become extremely to hold down.

On the other hand, you have Ryan’s plan, which, over the long haul, caps the government’s contribution to each individual and gives those individuals a choice about how and where to spend their health care dollars. It’s not a perfect plan, but it seems far more likely to produce a basically fiscally sustainable system than the one we just passed.