Experts: Obamacare Threatens to Send Healthcare Costs Skyrocketing

Saturday, 19 Apr 2014 04:21 PM

By Sandy Fitzgerald

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President Barack Obama says Obamacare is covering more Americans at a lower cost than was anticipated, but healthcare experts and economists warn that as more people start using their healthcare coverage, costs may skyrocket.

Growing insurance enrollment through rising employment and Obamacare means people have more money to spend on healthcare, reports The New York Times. But policy experts are concerned that the government and businesses won't be able to control healthcare spending as the economy grows and millions more people obtain insurance coverage.

“We knew this was coming,” Douglas Holtz-Eakin, a former head of the Congressional Budget Office and a prominent Republican economist, told the Times. "The question now is whether we can hold spending down.”

Spending on medicines rose 3.2 percent in the United States last year to $329.2 billion, according to a report by IMS Health Holdings Inc., it was reported this week. 

While that was far less than the double-digit increases seen in previous decades, it was a rebound from a 1 percent decline in 2012, the report found.

Among factors driving the increased spending were the cost of new medicines, price increases on some branded drugs, a $10 billion reduced impact of patent expirations compared with 2012, and the first rise in the use of healthcare services in three years, IMS reported.

IMS compiles and provides data on prescription drug use and trends for the pharmaceutical and healthcare industry.

The relatively small spending increase was helped in part by greater use of cheap generic drugs, which edged up to 86 percent of all prescriptions filled in the United States from 84 percent in 2012, despite fewer major new generic drug introductions compared with the impact seen in 2012.

It remains to be seen whether health spending will grow slowly or if it will surge, as economists fear. Soaring health spending will risk the government's budget as well as increase the cost of Obamacare's expansion, and experts warn that growing health costs could overshadow priorities such as education, research and development, welfare programs and more.

Before Obamacare became a factor, health spending had started falling during the mid 2000s, and hit record lows over the past five years because of the ongoing recession. When workers started losing their jobs and health coverage, families reduced out-of-pocket savings. Insurers also started charging higher co-pays and deductibles, also resulting in people using less care.

“Expanded coverage is happening simultaneously with the petering out of the recession’s dampening effect,” Charles Roehrig, the director of the Center for Sustainable Health Spending at the Altarum Institute told the Times. "It’s going to be hard to demonstrate how much is due to expanded coverage, versus just the economy recovering.”

There were provisions included in the Affordable Care Act to encourage insurers to move back from fee-for-service plans while stopping unnecessary costs, but many critics say the provisions may not be enough.

"This is a criticism I’ve had of the A.C.A. going back years — this is not revisionist history,” said Douglas Holtz-Eakin, a former head of the Congressional Budget Office and a prominent Republican economist. "I thought it was too heavy on the insurance expansion and too light on delivery-system reform. It has tons of projects and demonstrations. But the road to hell is paved with projects and demonstrations.”

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