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May 2014
First Step – Implementing the Affordable Care Act; Second Step – Health Care Cost Containment
By John Paul Galles

     The latest enrollment data being distributed on Obamacare shows that over 8 million people have signed up under the Affordable Care Act (ACA) through the federal and state exchanges. And an additional 4.5 million have been added to Medicaid roles. Nearly 28 percent of those enrolled are in the 18-34 age group, whose relative good health is vital to counter rapidly increasing premiums in future years of the program.

     In North Carolina, nearly 350,000 people signed up under the ACA giving North Carolina the fourth largest enrollment among the 50 states. Significant progress on implementing the ACA has begun.

     It is important to know that the primary goal of the ACA is to get as many people as possible signed into the program through their employer or through the exchanges as individuals. That was the number one requirement of insurance companies and hospital associations before they supported the ACA when it was first passed in March of 2010.

     Unfortunately, what is hugely lacking in the ACA are cost containment strategies that go beyond simply raising the number of people covered by insurance. Now that the ACA is being implemented and meeting its core ambitions, the next major step is to confront the actual costs of care. We cannot afford to spend nearly 20 percent of GDP on health care expenditures. It is bankrupting our economy as well as our citizens.

     Let’s take a look at how those costs have risen over the last 30 years. In 1980, according to the Centers for Medicare and Medicaid, health care expenditures per capita were $1,100 or 9.2 percent of GDP. By 1990, those numbers rose to $2,854 and 12.5 percent of GDP. By 2000, the numbers increased to $4,878 and 13.8 percent of GDP. And in 2010, the numbers became $8,402 and 17.9 percent. With companies and their employees absorbing all those increases, it is no wonder that household income has not advanced similarly over that time period. Money that would have gone for payroll increases has been eaten up by the spiraling costs of health care.

     Now, examine the employer and employee increases in contributions to pay for health care premiums for family coverage, and the numbers are even more shocking. In the last decade from 2000 to 2010, the total premium for family coverage rose from $6,438 per year to $15,073 per year. Employer contributions have grown from $4,819 to $10,944 over that same span while employee contributions have climbed from $1,619 to $4,129 on average. Those increases are beyond the pale.

     It is also interesting to compare U.S. costs with those in other internationally trading countries. Data from the OECD for 2009 show U.S. per capita expenditures at $7,598, compared to those in Italy at $3,020, France at $3,053, the U.K. at $3,311, Germany at $4,072, the Netherlands at $4,585, and Switzerland at $5,128. It is tough to be competitive with those countries when their health care costs are 40 to 68 percent of U.S. health care costs.

     The cumulative change in U.S. health care premiums for single and family coverage from 1996 to 2010 has risen 180 percent for family coverage and 148 percent for single coverage.

     The Affordable Care Act, implemented Jan. 1 of this year, has not been the cause of these increasing costs. When people complain about the rising disparity of incomes, they seldom look at health care premiums and expenditures as the biggest contributors to that inequality.

     While elements of the ACA will diminish the disparity between incomes and premiums through subsidies for those with incomes below 140 percent of the poverty level as well as the capping of co-pays and deductibles, much more needs to be done.

     It will take many years to undo the damage of swollen health care spending. We have only taken the first step to bringing these costs down. We have much work to do and the sooner the better!


John Paul Galles is the publisher of Greater Charlotte Biz.
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