No Real Savings in ObamaCare

JULY 28, 2010 E-MAIL THIS PRINTER FRIENDLY

Will ObamaCare save the state of Maryland money? According to a government task force, yes. Having looked at the issue of the various mandates the legislation places on the states, I find this hard to believe. But let’s just say it’s true that the state won’t be paying as much in health care costs under ObamaCare. That doesn’t mean the bill has lowered health care spending. It has just shifted this spending to the government and individuals. There are no real savings for Americans under ObamaCare.

Looking at the example of the Massachusetts Health Plan (upon which ObamaCare was based) is a good guide for our future. As Michael Tanner of the Cato Institute points out:

When the Massachusetts reforms first became law, they were projected to cost about $1.56 billion per year in total, with the largest component, the Commonwealth Care subsidies, costing roughly $725 million per year. As it turns out, those estimates were not even close.

By mid 2008, the state was projecting that Commonwealth Care would cost $869 million for FY2009, nearly a 20 percent increase, and more than $880 million in 2010. However, the state secretary of administration and finance says that she expects actual costs to be far higher— perhaps even as much as $100 million higher. The entire reform plan was projected to cost more than $1 billion in 2009, some $225 million above projections. State government spending on all health care programs has increased by 42 percent ($595 million) since 2006.

We can expect something similar for the federal government. ObamaCare is expected to cost $2.7 billion over the first ten years of its implementation. That number is probably too low.

Part of the savings the state expects to reap is from reduced uncompensated care costs. When the uninsured use medical care, the argument goes, they don’t pay for their care and the rest of us pay through higher insurance premiums. There are many flaws with this theory but I’ll let that go for now. What happened in Massachusetts with uncompensated care? As Tanner explains:

If the number of uninsured in the state had indeed been reduced by 74 percent, as suggested by the state, one might expect a comparable reduction in the amount of uncompensated care provided by the state’s hospitals. In reality, the number of people receiving uncompensated care has declined by just 36 percent. In fact, one of the original selling points behind the Massachusetts reform was that it would shift subsidies for uncompensated care from hospitals to individuals. Uncompensated care subsidies were supposed to fade away, with the state using the savings to help low- and middle-income residents buy insurance instead. But hospitals now say that the rate of uncompensated care continues to be so high that they cannot dispense with their subsidies.

ObamaCare may (possibly, not likely) save the state money. But the costs will simply be shifted to the federal government. Maryland taxpayers will be paying for this law one way or another.

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