The Problem With Obamacare Is That It Did Little To Reduce Overall Healthcare Spending

December 10th, 2016
in aa syndication, weekly economic summary

Rearranging the deck chairs on a sinking ship

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I was opposed to Obamacare when I read the actual legislation before it was passed by Congress. My concern was that it was not designed to reduce overall health care expenditures - it only redistributed costs between the insured.

Follow up:

Obamacare was analogous to rearranging deck chairs on a sinking ship. Yes, the deck chairs were not in the right place but the priority was stopping the ship from sinking. The health care system in the USA costs too much while providing too little. The poor delivery situation is apparent from the below graph from USA, Inc (slide 111).

And on Thursday this week, the CDC (Centers for Disease Control) released the USA's mortality data for 2015, and in summary:

  • Life expectancy for the U.S. population in 2015 was 78.8 years, a decrease of 0.1 year from 2014.
  • The age-adjusted death rate increased 1.2% from 724.6 deaths per 100,000 standard population in 2014 to 733.1 in 2015.
  • The 10 leading causes of death in 2015 remained the same as in 2014. Age-adjusted death rates increased for eight leading causes and decreased for one.
  • The infant mortality rate of 589.5 infant deaths per 100,000 live births in 2015 was not significantly different from the 2014 rate.
  • The 10 leading causes of infant death in 2015 remained the same as in 2014, although two causes exchanged ranks.

The USA health care ship is sinking with life expectancy falling - yah just cannot say with a straight face that the USA has the best system in the world.

Obamacare simply rearranged who paid the costs. The ill and the older worker paid less - and the new young wage earner was going to do the heavy lifting. Note the young historically drove consumer spending - but have been burdened not only with university debt and now Obamacare health care costs. Education 40 years ago was mostly was funded by state and local governments.

In any event, Obamacare promised lower costs. President Obama stated on 16 July 2012:

You should know that once we have fully implemented [Obamacare], you’re going to be able to buy insurance through a pool so that you can get the same good rates as a group that if you’re an employee at a big company you can get right now -- which means your premiums will go down. 

Obamacare mostly went into affect 01 January 2014. Are we seeing lower costs?

The problem with the FRED health care expenditure graph above is that it includes many programs not associated with Obamacare such as medicare, medicaid, veterans health, etc. We know that the USA has more old people than any past period - and these old people cost more to maintain their health. But the USA population under 65 has little changed over the last 5 years.

The above graph only includes insurance premiums and out-of-pocket expenses for those UNDER 65. With specificity - this is the increase in costs ABOVE INFLATION seen by the working age population. Obamacare did not reduce health care costs spent by the average working age Joe, and the projections for 2016 say there will be an even bigger increase.

Stop the ship sinking

Before going on, let me state that I am not against socialized medicine. I have lived the majority of my life successfully using using the socialized medical systems in other countries. I am against rearranging deck chairs when the ship is sinking. The USA system works well for those who can afford ever increasing health care costs - but half the population has seen no real change in their income in many years - and cannot afford an increase in medical care costs.

A good companion post to read is Fixing Obamacare – Why It Won’t Be Easy penned by Elliot Morss which concludes in part:

Obamacare is not the problem. Instead, it is the underlying demographics, unhealthy American life styles resulting in the most overweight and obese population in the world (except for a few South Pacific islands), manpower imbalances, and oligopolistic practices causing the growth in US health care costs.

I am not in the mood to be promised more affordable health care when costs actually go up - and that is the significant problem with Obamacare.

Other Economic News this Week:

The Econintersect Economic Index for December 2016 improved but still with the economic outlook for weak growth. The index remains near the lowest value since the end of the Great Recession. This month there are no recession warning flags. Six-month employment growth forecast indicates minor improvement in the rate of growth.

Bankruptcies this Week from Privately-held La Paloma Generating Company

Weekly Economic Release Scorecard:

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