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Good news on health reform keeps getting better

Posted by John McDonough  June 18, 2013 07:32 PM

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I always thought one of the shames of the 1993-94 failure of Clinton health reform was the missed opportunity to implement reform during a period of economic recovery when more solid public budgets and rising living standards would have made implementation much easier. I also recall passage of an ambitious Massachusetts health reform law back in 1988, just before the state's (and nation's) economy went into the dumps -- gutting the law was easy in an economic crisis.

By this logic, the implementation of the Affordable Care Act (ACA, Obamacare) now, during this period, is fortuitous. There is no better time to implement such a law than during a period of economic recovery. And even better, there is increasing evidence that Obamacare is helping -- not harming -- that economic recovery.

Further evidence came yesterday with two new reports suggesting that the slowdown in the rate of U.S. health spending growth is more than a reaction to bad economic times, and can be seen as a reflection of structural changes wrought by the ACA.

First, a new report commissioned by the Federation of American Hospitals, by the Dobson DaVanzo research firm, projects that the current slowdown in Medicare spending could result in as much as $2.6 trillion more in federal savings between 2014-2023 than the Congressional Budget Office projected in 2008, and further reducing the federal deficit by as much as $1 trillion.

Second, a new report from PwC Health Research Institute projects that, at 6.5%, the unadjusted rate of growth of private employer health spending will be lower in 2014 than it will be in 2013, already an historically lower rate of inflation.The report suggests that the factors driving down the rate of increase are here to stay for the time-being.

Both reports identify a series of structural changes, some triggered by the ACA and others already in motion, pushing the rate of increase downward.

We have seen this unanticipated impact from federal health system changes before. The implementation of a new Medicare hospital payment system in 1983 and the reductions in Medicare payments in the 1997 Balanced Budget Act both triggered huge drops in expected federal health spending, far larger than projected at the time of their passage. While the lower rates of increase did not last, the savings were significant, and helped trigger and sustain a period of robust economic growth. We can see more than a little evidence of the same effect going on now.

Back in 2007 and 2008, many gaffawed when Presidential candidate Barack Obama suggested enactment of his health agenda could result in savings as high as $2500 per person over 10 years. I didn't laugh, I grimaced, believing that the prediction would haunt Obama for a long time to come. Now, that number is no longer looking silly, and the President's health law can take a substantial portion of the credit.

Today, we are 100 days away from the opening of the new Health Exchanges/Marketplaces for uninsured consumers to begin applying for coverage. It's going to be a rough ride in states where Governors and Legislatures are determined to see the ACA fail. And it's going to be a lot smoother in states where Governors and Legislatures are committed to making the law work well.

It's increasingly clear that implementation of this important part of the law will be uneven. But frustrated consumers in Texas and Louisiana will have good reason to ask why a state with a huge uninsured population such as California can make it work while their own state government can't or won't.

More and more, the signs related to the ACA are pointing upwards.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »

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