NCPA - National Center for Policy Analysis

Why ObamaCare's Health Care Cost Controls Won't Work

January 4, 2013

As Congress comes together to further discuss long-term debt reduction strategies, lawmakers on the left are unwilling to tackle the issue that matters the most: entitlement spending. In particular, many prominent Democrats have argued against any reductions to Medicare, says Peter Suderman, a senior editor at Reason magazine.

  • Many opponents of cutting Medicare argue that health care cost control measures that have been passed in recent years -- such as the Affordable Care Act (ACA) -- are yet to be implemented and evaluated fully.
  • One measure in the ACA creates financial incentives for hospitals to avoid preventable readmissions.
  • Another, called Value Based Purchasing, pays more to hospitals that perform better on certain quality metrics.

Both reforms stem from the idea that reducing health care costs must come from changing the way the government pays for health care. With regard to financial incentives, there is little evidence that pay-for-performance reduces overall health costs.

  • In one study, there was a short-term increase in the quality of care a hospital offered but it disappeared after five years.
  • Another study looked at the 30-day mortality rates in hospitals that participated in the quality incentive demonstration project and found no difference between participating hospitals and those that didn't participate.
  • Similarly, a pay-for-performance pilot program launched in Medicaid found no quality improvement.

There is also little evidence that Value Based Purchasing will yield savings. One study found that the program has a small impact on hospital payments that is not enough to incentivize better care or a reduction in costs.

Another touted cost-saving measure in the ACA is the Medicare Shared Saving Program. This program was created to provide bonuses to more care groups that are more cost-efficient. However, the projected savings would actually be 1 percent or less.

The ACA is not the only health care cost control measure put in place by the Obama administration. The 2009 stimulus bill gave $30 billion to incentivize hospitals to adopt new information technology systems. But like other cost control measures, this ended up costing taxpayers about $1 billion a year more because hospitals billed Medicare more.

Source: Peter Suderman, "Why ObamaCare's Health Care Cost Controls Won't Work," Reason Magazine, December 13, 2012.


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