Can Obamacare Save Medicare?

If the ACA can deliver on its promise of a healthier population, it would save Medicare big money. The law’s critics aren’t holding their breath.

US President Barack Obama greets a member of the audience as he leaves after attending the Affordable Care Act town hall meeting at the Holiday Park Multipurpose Senior Center in Wheaton, Maryland on June 8, 2010. AFP PHOTO/YURI GRIPAS (Photo credit should read YURI GRIPAS/AFP/Getty Images)
National Journal
Sophie Novack
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Sophie Novack
Jan. 22, 2014, midnight

Mitt Rom­ney con­tinu­ally ac­cused Pres­id­ent Obama of “rob­bing Medi­care to fund Obama­care” throughout the 2012 elec­tion. Now, long after the cam­paign, the charge lives on as one of Re­pub­lic­ans’ top talk­ing points as they at­tempt to shore up sup­port among seni­ors.

But the Af­ford­able Care Act’s de­fend­ers say the GOP has it back­wards. If the law can de­liv­er on its prom­ise of a health­i­er pop­u­la­tion, they say, it will go a long way to­ward keep­ing the cash-strapped en­ti­tle­ment pro­gram solvent.

By ex­pand­ing in­sur­ance to mil­lions of people, the law hopes to re­duce the rate of pre­vent­able con­di­tions that, as pa­tients age and enter Medi­care, be­come very costly. And there’s some evid­ence that broad­er in­sur­ance cov­er­age will lead to bet­ter health and lower costs.

A Decem­ber 2013 Gov­ern­ment Ac­count­ab­il­ity Of­fice re­port found that con­tinu­ous in­sur­ance — about six years — be­fore Medi­care en­roll­ment is as­so­ci­ated with bet­ter health and lower spend­ing. Pa­tients who were un­in­sured in the six years lead­ing up to Medi­care en­roll­ment used $6,733 dur­ing their first year in the pro­gram, ac­cord­ing to GAO. That’s 35 per­cent more than the $4,390 spent in the first year on pa­tients who were con­tinu­ally covered, the re­port said.

The dis­crep­ancy in Medi­care spend­ing on healthy versus sick be­ne­fi­ciar­ies of­fers in­sight in­to the need for im­proved pre-pro­gram care.

“It should be no sur­prise that the Medi­care pro­gram for health care for the eld­erly and dis­abled spends most of his money on the sick­est be­ne­fi­ciar­ies,” said Dan Perry, pres­id­ent of the Al­li­ance for Aging Re­search. Perry es­tim­ates that 15 per­cent of Medi­care be­ne­fi­ciar­ies have mul­tiple chron­ic ill­nesses and ac­count for about 75 per­cent of the pro­gram’s costs.

In­sur­ing more of these in­di­vidu­als un­der the ACA could res­ult in catch­ing and con­trolling more of these dis­eases be­fore in­di­vidu­als enter Medi­care. If the act does suc­ceed in dra­mat­ic­ally lower­ing Medi­care costs, it would ease a large fisc­al prob­lem.

Medi­care cur­rently makes up about 16 per­cent of the fed­er­al budget, cov­er­ing around 50 mil­lion seni­ors at a cost of about $600 bil­lion. Though the rate of over­all health care spend­ing has slowed in re­cent years, the high levels re­main a driver of the na­tion­al debt and de­fi­cit. The prob­lem is poised to worsen as aging baby boomers enter Medi­care en masse.

But suc­cess in de­creas­ing health spend­ing has thus far been elu­sive, as has dra­mat­ic­ally im­prov­ing pub­lic health out­comes, and Obama­care’s crit­ics are skep­tic­al that the new law is the an­swer.

Ex­pand­ing in­sur­ance does not guar­an­tee health­i­er people, says Joe Ant­os, a health care and re­tire­ment policy schol­ar at yhe Amer­ic­an En­ter­prise In­sti­tute.

“There are ‘good’ in­sur­ance policies and not-good in­sur­ance policies. If you have in­sur­ance with a high de­duct­ible, for ex­ample, and you are lower-in­come, it might be too much of a bar­ri­er to get­ting the ser­vices you need,” he said.

“With the ACA, most of the sil­ver plans I looked at tend to have quite high de­duct­ibles, which dis­cour­age people from get­ting ser­vices. With Medi­caid, the ac­cess to pro­viders is quite lim­ited,” he said.

The chal­lenge is that in­creased in­sur­ance does not ne­ces­sar­ily mean in­creased care, and in­creased care does not equate to im­proved health.

“Just hav­ing in­sur­ance is not enough — then [con­sumers] have to go to the phys­i­cian,” said Bill Pierce, seni­or dir­ect­or of APCO World­wide and former HHS spokes­man for the Bush ad­min­is­tra­tion.

Pierce says it is too early to know if and how those newly in­sured un­der the ACA will ac­tu­ally use their cov­er­age, though in­surers are keep­ing a close watch. Yet he is op­tim­ist­ic that hav­ing cov­er­age could en­cour­age people to see the doc­tor, im­prov­ing the chance of catch­ing and bet­ter man­aging dis­ease.

“The idea of do­ing bet­ter at pre­vent­ing and man­aging care goes to the fun­da­ment­al nature of how we de­liv­er care in this coun­try,” Pierce said. “A lot of the oth­er solu­tions pro­posed that scratch the sur­face can be jus­ti­fied, but they are all things that don’t go after the prob­lem. We need to al­ter the heart of what is driv­ing cost.”

Pierce de­scribes the ACA as an ac­cess bill, not a cost-con­trol one. However, if the law man­ages over time to make cov­er­age, and care, more ubi­quit­ous, we could be­gin to see pay­offs down the line, in im­proved health and de­creased spend­ing.

“It’s an in­vest­ment, if you will,” he says. “The whole idea of in­sur­ance is an in­vest­ment.”

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