White House Says Health Law Helping Slow Rise in Costs

The White House said spending on health care in the last three years has risen at the slowest pace on record, with implications for American pocketbooks, jobs, the federal budget and the economy.

A report by President Barack Obama’s economic advisers linked slower growth of health costs to passage of the Affordable Care Act in 2010. It was released today as the administration is defending the law from an onslaught of criticism after the flawed opening of the federal online insurance exchange and the cancellation of individual policies for hundreds of thousands of Americans.

As part of that defense, Obama is scheduled to meet this afternoon with state insurance commissioners to discuss their concerns about state-by-state rules for implementation of the law.

“Health care spending is the lowest on record,” and health care price inflation “is at the lowest rate in 50 years,” rising about 1 percent annually, the lowest since September 1962, according to a 28-page report today by the White House Council of Economic Advisers.

Health care expenditures account for 18 percent of U.S. gross domestic product. The report said spending will increase about 1.3 percent in the three years that end Dec. 31. That’s down from a 1.8 percent average increase in 2007-2010 during the recession, and less than a third of the 4.5 percent average increase in the last 45 years.

Economic Impact

Obama cited the slowing rise in spending on health care as a boon to businesses and a boost to U.S. economic growth in remarks to chief executives yesterday.

“There was a lot of skepticism when we passed the Affordable Care Act that we were going to be giving a lot of people care but we weren’t doing anything about the underlying costs,” Obama said at a Wall Street Journal forum in Washington. “And, in fact, over the last three years, we’ve seen health care costs grow at the slowest pace in 50 years. And that affects the bottom lines of everybody here.”

The CEA report stands in contrast from a conclusion published last month by Actuaries at the Centers for Medicare and Medicaid Services, who don’t answer to the White House, that costs eased because of the slowdown of the economy rather that the law, passed in 2010.

Structural Changes

“The current slowdown is the result of more than just the recession and its aftermath,” the White House report said, citing the advent of “structural” changes in the health-care industry.

The report credits the law, known as Obamacare, with cutting Medicare overpayments to insurance companies and doctors, reducing hospital readmission rates, and trimming reimbursement costs to health-care providers, such as hospitals.

If costs and spending continue to rise more slowly, the effect may be felt throughout the economy, according to the report, with short-term and long-term benefits.

Slower growth in health-care costs may leave room for employers to hire more people or increase wages, it said. In the long-term, the nonpartisan Congressional Budget Office said that the ACA “will reduce deficits by about $100 billion” over a decade, partly due to slower increases in Medicare costs.

The $1.3 trillion Affordable Care Act seeks to extend coverage to most of the nation’s 50 million uninsured by expanding state Medicaid programs and creating government-run insurance exchanges to buy subsidized medical plans. Critics have become more vocal amid the troubled opening of the federal exchange on Oct. 1.

Support Falls

A CBS News poll released today showed that Americans’ approval of the health-care law has fallen to 31 percent, the lowest recorded in CBS News Polls, and a decline of 12 points since last month. Sixty-one percent disapprove of the law, the network said.

“It is self-evident this isn’t working. Nobody’s defending it,” Senator Ted Cruz, a Texas Republican who led an unsuccessful fight to scuttle the law earlier this year, said on CNN today. “This is killing jobs,” he said, and insurance premiums “are skyrocketing across the country.”

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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