Even before the Affordable Care Act became law, about 90 percent of the conversation and criticism of it was about coverage. Little has been said about its ability to control costs.

March 23, the ninth anniversary of the ACA’s passage, presents a good opportunity to examine its legacy on cost control — a legacy that deserves to be in the foreground, not relegated to the background behind the exchanges, Medicaid expansion, and work requirements.

One month after the ACA had passed, the Office of the Actuary of the Department of Health and Human Services projected its financial impact in a report entitled “Estimated Financial Effects of the ‘Patient Protections and Affordable Care Act’, as Amended.” The government’s official record-keeper estimated that health care costs under the ACA would reach $4.14 trillion per year in 2017 and constitute 20.2 percent of the gross domestic product (GDP).

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Fast forward to December 2018, when that same office released the official tabulation of health care spending in 2017. The bottom line: cumulatively from 2010 to 2017 the ACA reduced health care spending a total of $2.3 trillion.

In 2017 alone, health expenditures were $650 billion lower than projected, and kept health care spending under 18 percent of GDP — basically a tad over where it was in 2010 when the ACA was passed. It did all of this while expanding health coverage to more than 20 million previously uninsured Americans.

Compared to the 2010 projections, the government’s Medicare bill in 2017 was 10 percent ($70 billion) less, and spending for Medicaid and the Children’s Health Insurance Program was a whopping $250 billion below expectations (partially — but only partially — due to the failure of some states to expand the program). The actuary had predicted in 2010 that employer-sponsored insurance would cost $1.21 trillion in 2017, but it came in at $1.04 trillion, a difference of $170 billion for that year.

Put another way, health care spending in 2017 was $2,000 less per person than it was projected to be. And for the 176 million Americans who have private employer-sponsored insurance, their lower premiums averaged just under $1,000 per person.

Barack Obama pledged on the campaign trail and as president that he would sign a health care bill that lowered family health insurance premiums by $2,500. Conservative politicians and pundits roundly mocked him. Yet the ACA has more than delivered on that promise, saving about $4,000 per family. And these lower health care premiums probably contribute to the recent rise in workers’ wages.

One reason the ACA’s enormous success in cost control goes unappreciated is that no one experiences the difference between projections and reality. What could have happened is intangible. All we feel is what actually happens.

At least three trends make it hard for Americans to appreciate these lower costs. First, employers are foisting more of the cost of health insurance onto employees. Employees’ share of health premiums has gone up 32 percent since 2012 while the employer portion has gone up just 14 percent. Second, drug prices are rising and Americans are finding copays for them more and more onerous. Third, more and more Americans are enrolled in high-deductible health plans. For them, a $2,000 or $3,000 deductible is stressful even if they never actually pay it.

Why have health care expenditures risen more slowly than projected? No one is entirely sure. But one thing is certain: The slow growth in health care costs in 2017 is not because of the Great Recession of 2008. We are now in the second-longest economic recovery in American history — eight years and counting of continuous economic growth. If the Great Recession had an impact on health care costs, it is long gone. It is possible that high-deductible plans contributed by encouraging people not to use as many services and shop for care.

Hence the most likely explanation has to be the ACA. It changed how physicians and hospitals are paid, shifting toward more value-based payments. It required reducing wasteful and expensive readmissions and encouraged efficient redesign of care. And it spurred the private sector — insurers and employers — to try their own payment reforms, such as reference pricing, to control costs. Indeed, the latest data suggest a real slowdown in utilization of health care services. It will take health economists a few more years to sort out all the contributing factors.

The ACA has helped bend the cost curve. But we should not rest on this $650 billion savings success. We can do more.

Policymakers have increasingly come to understand that high prices are the biggest contributor to the growth in the cost of health care. We need to rein in prices, and there are several good options for doing this. First on the list must be regulating drug prices. We spend about 56 percent more than other developed countries on drugs. We need national — not just Medicare — drug price negotiations, which other countries have employed to great effect.

Second, Congress might limit the prices that hospitals can charge private insurers to 140 percent of what Medicare charges. This would prevent the exorbitant prices that hospital systems demand when their bargaining leverage is enhanced by creating local monopolies.

Third, we could introduce competitive bidding for Medicare Advantage plans. These are the private insurance plans that Medicare recipients can choose to enroll in instead of traditional Medicare. They now account for one-third of Medicare enrollees and are the fastest-growing part of Medicare. Instead of having Medicare set the benchmark premium it will pay, we should allow insurers to set their premiums and compete in the marketplace.

Other policies to control prices include enhanced anti-trust enforcement of hospital mergers and acquisitions of physician groups, and emulating Massachusetts in setting a public cap on health cost increases, linking the growth in health costs to growth in the state economy, and then shaming providers or payers that exceed the limit.

Despite constant criticism and occasional sabotage, the Affordable Care Act has successfully expanded health insurance coverage — even though it included individuals with pre-existing conditions — and controlled runaway health care costs. We need to build on its tremendous cost-control success.

Ezekiel J. Emanuel, M.D., is an oncologist and vice provost for global initiatives, university professor, and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania; and a senior fellow at the Center for American Progress. He worked in the White House on the Affordable Care Act from 2009 to 2011. His most recent book is “Prescription for the Future” (PublicAffairs, 2017).

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  • What an excellent article!
    I am aghast that the current U.S. President is now ignorantly threatening to destroy all the success of the ACA.

    • Dale, this amounts to yes, putting lipstick on a pig. It’s still a pig.
      In 2013, President Obama said the ACA bill was projected to cost 896 billion dollars over the first 10 years. The total is now close to two trillion over the same 10 year period. You can’t save money on an inflated projection. You can only save money over actual costs.

  • This analysis removes one very important piece of information out, the employer subsidized market. Lets say he is right, spending for government programs went down (I still question his numbers), employer/private insurance had no such luck. Physicians and hospitals merely shifted the lost revenue to the contracts with private insurers. Hence, working people got shafted.

  • So Obamacare’s cost came in under a plucked from the air alarmist estimate to sell the program in the first place? Give me break. Bend the cost curve? Laughable, there are no provisions in Obamacare that even address lowering health care costs. It’s 100% an insurance law, that’s sole purpose was to shift and conceal who pays for it.

    If there’s any savings in it at all, it’s because it pushed employers to shift more costs on to their employees, who can’t afford the high deductibles, and forego treatment until the problem becomes chronic. Wait a minute, wasn’t that the problem Obamacare was supposed solve?

    • Good ‘ol Zeke–breaking his arm patting himself on the back and minimizing anything that shows his bias (work on ACA, brother of Rahm, etc). The simple truth is this–the government has shifted the costs to people who not only reduce their invalid use of healthcare, but also their valid use. What a joke.

  • Professor Emanuel, thank you for the reminder. More or less of the same potion needs to be measured against the effect whether curing or killing the patient. The healthcare rising costs have salient historical factual root causes and not just theoretical projections of assumptions. Hint: Medicare mandating taxes and their collection + mandated fixed reimbursement rate even if it doesn’t cover the costs of care delivery + criminally prosecuting any provider that charges 1 penny above these rates to any government beneficiary + cost-shifting the negative reimbursement rates from government to commercial payors + governmentally-unaccounted for baby boom with longevity + new technologies that cost many multiples due to regulatory overprotective politically embedded rules and you will ALWAYS have the inevitable result even with the best of intentions and minds to conceive and program leaders to execute = No monies left in the Medicare fund. President Obama, to his credit, was the only leader that had the political courage and capital to try and also solve the insolvent program.

  • I’m thankful to have employer-provided health insurance — if I didn’t a silver ACA plan would cost me $1,400 for just one person in her 40’s and I would choose to go without health insurance. My employer-provided plan limits me to five office visits per year so I try to ration them. If that wasn’t bad enough my PCP now has a yearly concierge fee of $1,800, which doesn’t include any services. My current idea of health care is to google my symptoms and then go on Amazon and search for an OTC solution. Also, as a woman of color, I know that “value-based payments” means I could be much less likely to receive a life-saving test or treatment than a white male. I guess this might be someone’s idea of a successful health care outcome, if that’s your vision of success.

  • My anthem policy on the CT stare exchange is outrageous.. I’m paying $471 premium per month and have an $4,300 ded and a $8,600 out of pocket max. This is for an individual policy and I’m stuck with it!! There were only 2 insurance companies in the exchange and other were higher!! This will only help if I’m run over by a bus or have a terrible problem. I can’t wait for Medicare. But I may be bankrupt by then.

  • I have no idea where u are getting this conclusion. I do not know a single family that is paying less for healthcare. If you want to look for a reason, let’s look at the massive increase in deductibles and coinsurance. I think the reduction in spending can certainly be ascribed to families being priced out. If I know my deductible is 5k and coinsurance on top of that, I think twice before making an appointment. Higher deductibles and coinsurance have caused people to limit their use of the healthcare system.

  • Medicare for All will save us even more! The industries undermined the ACA, and are using the ACA to ensure their profits. It is really clear that these “experts” do not know how the ACA is being used against patients to save money and drive profitability. In Post Fact America, the facts are a matter of opinion.

    • Mavis, Medicare for all will not save money, but will create rationing. Right now, Medicare’s reimbursement rate for services to doctors and hospitals is 60% of what the private health insurance market is paying. Medicare covers approximately 15% of the national population currently. It is common sense that if Medicare covers 100% of the population, then healthcare providers will automatically receive a 40% cut in pay, causing massive bankruptcy’s. The healthcare industry will not take a cut in pay, so they will demand the same revenue. They will not recoup the full 40% from Medicare, so they in turn will ration care to maintain their profitability, again common sense. Medicare for all is just a big smokescreen for giving government more power to control citizens lives. Just look at any country with government healthcare.
      The only way to lower healthcare costs and increase quality and access is a regulated free market. This requires transparency of pricing and quality of the services provided, along with financial rewards for the consumer for using those tools providing pricing and quality of services in obtaining their care.
      How much is an Appendectomy from one provider to another? What is their rate of complications, or to put it more simply, would you prefer a surgeon who had a passing grade of 70, or a surgeon who was st the top of their class? Lack of transparency, fraud, waste, and inefficiency is what is causing skyrocketing costs in the healthcare industry. Bring the industry out from the dark into the light.

  • “Compared to the 2010 projections, the government’s Medicare bill in 2017 was 10 percent ($70 billion) less” Dollar-to-dollar costs, adjusted for core inflation, would be a far more appropriate indicator of actually costs year to year than an arbitrary projection. Isn’t it possible these projections were flawed in the first place to drum up political support for one position on ACA over another? It wouldn’t be the first time someone made something up to sell legislation.

    “Third, more and more Americans are enrolled in high-deductible health plans.” This might explain the lower premiums. That doesn’t make it a good thing if the actual cost of a plan is, in reality, the sticker price plus $3,000 or more. I even saw exchange plans that cost around $6,000 per person and had a $5000 deductible. I mean why bother with insurance if you’re young, healthy and paying the premium will essentially mean nothing. If you’re not young, well you’re probably on medicare.

    • Dear Dr. Emanuel,

      It’s truly disheartening when people like you spread ACA propaganda.

      I’ve been a health insurance broker for over thirty years, and as any experienced broker knew when ACA started, health insurance cost projections that were made by the Obama Administration were made intentionally high.
      That way victory can be claimed when cost comes in less. A political victory, but a lie nonetheless.

      Where else can you claim to save money than coming in less than an unrealistically high cost projection. Only in Washington D.C.

      I remember in fall of 2013 DHS predicted health insurance rates would go up on average only 10% to 12% nationally due to ACA. DHS realized their political folly and two months later change the projected increase to 26% nationally, but did not spread it to the media. When the average rate increase came in at 18%, DHS claimed health insurance rate increases came in far less than they projected. ACA was a Success!

      This is why no one trusts our government.

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