Skip to main content

Take another look at health care act

By Aaron E. Carroll, Special to CNN
July 20, 2012 -- Updated 0210 GMT (1010 HKT)
Allison Miller was among the nurses and doctors giving free care in July in the Los Angeles area.
Allison Miller was among the nurses and doctors giving free care in July in the Los Angeles area.
STORY HIGHLIGHTS
  • Aaron E. Carroll: Idea that GOP wants to cut, Democrats want to spend is a myth
  • Carroll says the Affordable Care Act cuts future costs of health care significantly, if not enough
  • Cuts in Medicare spending and oversight of abuses mean substantial savings, he says
  • Carroll: Parts of the act save money and some cost, but overall, it reduces the deficit

Editor's note: Aaron E. Carroll is an associate professor and vice chairman of health policy and outcomes research in the Department of Pediatrics at the Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.

(CNN) -- Unless you've been living under a rock, you know people are concerned about the deficit. Or at least they say they are. You'd also have to be willfully ignoring everything around you not to know that health care spending is a significant cause, if not the cause, of our long-term fiscal problems.

The narrative that seems to be going around Washington argues that there are two schools of thought about how to improve our financial outlook. One side wants to cut spending. The other side wants to increase taxes. Or, so it goes.

I was out to dinner on Saturday night with a friend who is rather pessimistic about compromise in our government. He believes that the chances for passing anything that might reduce spending on health care in the future are near zero. There's just one problem with his outlook. We've already passed a law that does a great deal to reduce future health care spending.

Aaron E. Carroll
Aaron E. Carroll

I have argued many times that I don't think the Affordable Care Act does enough to contain costs. I still believe that's true. But let's not ignore the fact that it does a lot. More, in fact, than anything else passed by Congress and signed into law by a president in quite some time.

Right off the bat, we need to remember that the Affordable Care Act makes significant cuts to future Medicare spending. Reductions in overpayments for Medicare Advantage constitute almost $140 billion in savings over a decade. Changes in the fee-for-service reimbursement schedule add up to almost $200 billion. That's an enormous amount of money, so large that it scared many people into thinking that Medicare would be severely curtailed. Running against Medicare cuts helped sweep the Republicans into power in the House of Representatives in 2010. Often, such arguments came from the same people now decrying the Affordable Care Act for not cutting health care spending enough.

But that's just the tip of the iceberg. There are lots of other payment reforms (PDF) that should "bend the curve" for Medicare in the next decade. Hospitals will be punished for re-admissions for certain conditions. This is expected to save $8.2 billion. Refusing payments for hospital-acquired conditions should save another $3.2 billion. Accountable care organizations, for better or for worse, are expected to save almost $5 billion in the first eight years as well.

House GOP repeals Obamacare -- again
Obama: No apology for health care fight
'GPS': Zakaria's take on U.S. health care

Everyone hates waste in the system. The health care act does something about that as well. Specifically, it strengthens our means to investigate and then go after people who abuse Medicare or Medicaid. The Congressional Budget Office has calculated that the health care act's provisions for abuse of these programs could reduce spending by an additional $1.8 billion.

Surely you've heard about the Independent Payment Advisory Board? This one, too, has cost the administration politically. It's been demonized as an actual "death panel" of unelected, unaccountable people who will ration your Medicare. That's not true. The panel is made up of people who need Senate approval (not easy), and they don't serve for life. Moreover, they have a very specific, limited task.

If, and only if, the amount of money Medicare spends per person goes up faster than the consumer price index, the panel will make recommendations to Congress on how to get Medicare to spend less. By statute, they can't "ration" care or increase premiums, deductibles or co-payments. Still, what makes this a better cost control than what existed before is that these recommendations automatically become law unless Congress can pass a different plan that achieves the same savings. Because Congress has a hard time passing anything these days, that's not as likely to happen. The payment advisory board gets going in 2014, and in just its first five years, it's expected to reduce spending for all Medicare programs by more than $23 billion (PDF).

These are just mechanisms acting on government insurance, though. The Affordable Care Act has some measures that affect private spending as well. The excise tax is one of those. Starting in 2018, plans that cost more than a certain amount will have a 40% tax levied on employers who provide them. Let's acknowledge that such taxes will absolutely be passed on to regular people, so it doesn't matter who is stuck with the bill at first. It's also worth acknowledging that the levels where the tax kicks in are really high ($10,200 for an individual plan and $27,500 for a family). Even so, many believe that this will eventually be one of the strongest levers the Affordable Care Act contains to rein in spending in the future.

We should also mention the insurance exchanges themselves. Although it will take time to work out the kinks, the general idea is that the exchanges should reduce the administrative burden of individually rating and selling plans to consumers. Insurance companies instead will have to compete on value, and try to negotiate with providers to reduce spending to remain competitive. We'll have to see how well this works.

Finally, the law invests in the Patient-Centered Outcomes Research Institute and the CMS Innovation Center, which may lead to new ideas to contain costs as well. These are difficult to score, but they are being researched.

You could argue that any one of these (other than the cuts to Medicare) is on the smaller side. But when you add them up, they start to get significant. So much so, that the Congressional Budget Office estimates that the Affordable Care Act reduced the long-term fiscal gap by 2% of the gross domestic product over the next 75 years. That's about 25% to 33% of what is necessary to stabilize the debt in the long run. Granted, some of that deficit reduction comes from new taxes. But some of it also comes from reduction in future spending. Parts of the act cost money. Parts of the act save money. Overall, it is deficit reducing.

You may not like these types of efforts. They may offend your political sensibilities. You may favor a more consumer-driven type of system, or one that relies less on panels of experts. But there's a difference between arguing that you want different measures and pretending those measures don't exist.

Further, some have argued that these measures won't last. Someone will change them. Someone will gut them. But you have to remember that right now, they are law. Making them weaker requires action. Specifically, it requires a House and Senate to pass something altering them, and then a president to agree to sign it. That's hard to do in today's environment.

Of course, some are campaigning on trying to do that right now. They want to overturn all of the above completely. That's fine; it's their right. But it's hard to understand how you can argue that the "other side" isn't serious about decreasing future health care spending while simultaneously working toward overturning the law it passed that does just that.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions in this commentary are solely those of Aaron E. Carroll.

ADVERTISEMENT
Part of complete coverage on
August 27, 2014 -- Updated 1626 GMT (0026 HKT)
The death of Douglas McAuthur McCain, the first American killed fighting for ISIS, highlights the pull of Syria's war for Western jihadists, writes Peter Bergen.
August 26, 2014 -- Updated 2242 GMT (0642 HKT)
Former ambassador to Syria Robert Ford says the West should be helping moderates in the Syrian armed opposition end the al-Assad regime and form a government to focus on driving ISIS out
August 27, 2014 -- Updated 1321 GMT (2121 HKT)
Ruben Navarrette says a great country does not deport thousands of vulnerable, unaccompanied minors who fled in fear for their lives
August 27, 2014 -- Updated 1319 GMT (2119 HKT)
Robert McIntyre says Congress is the culprit for letting Burger King pay lower taxes after merging with Tim Hortons.
August 26, 2014 -- Updated 2335 GMT (0735 HKT)
Wesley Clark says the U.S. can offer support to its Islamic friends in the region most threatened by ISIS, but it can't fight their war
August 27, 2014 -- Updated 1126 GMT (1926 HKT)
Jeff Yang says the tech sector's diversity numbers are embarrassing and the big players need to do more.
August 26, 2014 -- Updated 2053 GMT (0453 HKT)
America's painful struggle with racism has often brought great satisfaction to the country's rivals, critics, and foes. The killing of Michael Brown and its tumultuous aftermath has been a bonanza.
August 26, 2014 -- Updated 2019 GMT (0419 HKT)
Ed Bark says in this Emmy year, broadcasters CBS, ABC and PBS can all say they matched or exceeded HBO. These days that's no small feat
August 26, 2014 -- Updated 1919 GMT (0319 HKT)
Rick Martin says the death of Robin Williams brought back memories of his own battle facing down depression as a young man
August 26, 2014 -- Updated 1558 GMT (2358 HKT)
David Perry asks: What's the best way for police officers to handle people with psychiatric disabilities?
August 25, 2014 -- Updated 1950 GMT (0350 HKT)
Julian Zelizer says it's not crazy to think Mitt Romney would be able to end up at the top of the GOP ticket in 2016
August 25, 2014 -- Updated 2052 GMT (0452 HKT)
Roxanne Jones and her girlfriends would cheer from the sidelines for the boys playing Little League. But they really wanted to play. Now Mo'ne Davis shows the world that girls really can throw.
August 25, 2014 -- Updated 1629 GMT (0029 HKT)
Peter Bergen and Emily Schneider say a YouTube video apparently posted by ISIS seems to show that the group has a surveillance drone, highlighting a new reality: Terrorist groups have technology once only used by states
August 25, 2014 -- Updated 2104 GMT (0504 HKT)
Kimberly Norwood is a black mom who lives in an affluent neighborhood not far from Ferguson, but she has the same fears for her children as people in that troubled town do
August 22, 2014 -- Updated 2145 GMT (0545 HKT)
It apparently has worked for France, say Peter Bergen and Emily Schneider, but carries uncomfortable risks. When it comes to kidnappings, nations face grim options.
August 26, 2014 -- Updated 1727 GMT (0127 HKT)
John Bare says the Ice Bucket Challenge signals a new kind of activism and peer-to-peer fund-raising.
August 22, 2014 -- Updated 1231 GMT (2031 HKT)
James Dawes says calling ISIS evil over and over again could very well make it harder to stop them.
August 24, 2014 -- Updated 0105 GMT (0905 HKT)
As the inquiry into the shooting of Michael Brown continues, critics question the prosecutor's impartiality.
August 22, 2014 -- Updated 2247 GMT (0647 HKT)
Newt Gingrich says it's troubling that a vicious group like ISIS can recruit so many young men from Britain.
August 21, 2014 -- Updated 1450 GMT (2250 HKT)
David Weinberger says Twitter and other social networks have been vested with a responsibility, and a trust, they did not ask for.
August 22, 2014 -- Updated 1103 GMT (1903 HKT)
John Inazu says the slogan "We are Ferguson" is meant to express empathy and solidarity. It's not true: Not all of us live in those circumstances. But we all made them.
August 22, 2014 -- Updated 1223 GMT (2023 HKT)
Retired Lt. Gen. Mark Hertling says he learned that the territory ISIS wants to control is amazingly complex.
August 20, 2014 -- Updated 1951 GMT (0351 HKT)
Cerue Garlo says Liberia is desperate for help amid a Ebola outbreak that has touched every aspect of life.
August 21, 2014 -- Updated 1742 GMT (0142 HKT)
Eric Liu says Republicans who want to restrict voting may win now, but the party will suffer in the long term.
August 21, 2014 -- Updated 1538 GMT (2338 HKT)
Jay Parini: Jesus, Pope and now researchers agree: Wealth decreases our ability to sympathize with the poor.
August 21, 2014 -- Updated 1200 GMT (2000 HKT)
Judy Melinek offers a medical examiner's perspective on what happens when police kill people like Michael Brown.
August 19, 2014 -- Updated 2203 GMT (0603 HKT)
It used to be billy clubs, fire hoses and snarling German shepherds. Now it's armored personnel carriers and flash-bang grenades, writes Kara Dansky.
August 20, 2014 -- Updated 1727 GMT (0127 HKT)
Maria Haberfeld: People who are unfamiliar with police work can reasonably ask, why was an unarmed man shot so many times, and why was deadly force used at all?
ADVERTISEMENT