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From the Press Conference: Does Obamacare Bend the Curve?

A few minutes ago President Obama got a question on health care reform, based on new projections that supposedly show it will fail to “bend the curve” on costs. But that’s not what the projections show. I was going to write a long post on this—and, sometime soon, maybe I will. But let me quickly go over this, because it’s understandably confusing but very important.

The projections, based on government estimates and published this week in Health Affairs, are an update of projections the government made earlier in the year, while Congress was in the final stages of debating the Affordable Care Act. And the basic storyline hasn’t really changed.

The Affordable Care Act has two basic components.

There are, first, provisions to cut the cost of care—like reductions in what Medicare pays some providers, cuts in subsidies for private insurance companies, and a tax on generous health benefits that economists believe will reduce private health care spending. These features come on line quickly (except for the tax) and, year after year, will reduce what we spend on health care.

The second group of provisions would make insurance more comprehensive and more accessible. These include expansions of Medicaid as well as the creation of subsidies for lower- and middle-income people who buy private insurance. These mostly come on line in 2014 and, when they do, will cause a one-time jump in health care spending.

Put these components together and you get a steady reduction in spending growth, interrupted by a spike in 2014. Here’s what it looks like graphically, from that Health Affairs article:

The sum total of spending between 2011 and 2019 is slightly higher than it would been without reform, but the difference is miniscule—and, arguably, a tiny price to pay for the extra security reform brings to tens of millions of Americans. No less important, the annual rate of growth in 2019, the final year in the projection, is slightly lower than it would have been without reform.

I do mean "slightly": We're talking 6.7 percent growth in national health expenditures versus 6.8, which is basically a rounding error on these sorts of projections. Still, when we talk about “bending the curve,” that’s what we mean--reducing the rate of growth, so that we spend less money in the future. And the curve is bending in the right direction.

Would it be better to reduce the rate of growth--i.e., “bend the curve”--significantly? You bet. But this is still a change for the better.

Huh, I guess that was a pretty long item after all. Still, if you want to read more, read Igor Volsky and Ezra Klein.