An article published by Forbes claiming that Obamacare will increase health care costs by$7,450 for a typical family of four is spreading like wildfire across the internet, but causing eye rolls from economists across the country.
The estimate by author Chris Conover, an adjunct scholar at the American Enterprise Institute, comes from a Center for Medicare and Medicaid Services (CMS) report, which projects that national health care spending will increase once the uninsured begin enrolling in the law’s health care exchanges.
“By 2022, the ACA is projected to reduce the number of uninsured people by 30 million, add approximately 0.1 percentage-point to average annual health spending growth over the full projection period, and increase cumulative health spending by roughly $621 billion,” the report finds.
So, $621 billion divided by 310 million Americans = $7,450 per household of four Americans. MATH FOR THE WIN!
Only, it's not.
One economist interviewed by ThinkProgress, the Center for Budget and Policy Priorities’ Paul Van de Water, described this calculation as one of the stupidest things he’s read in a long time and likened it to arguing that college costs will increase for a “typical” family if the federal government adopts policies that help lower-income Americans afford college educations. Yes, the nation will spend more on education if more students enroll in colleges and universities, but the “typical” student already attending college won’t; she or he will continuing paying tuition at more or less the same rate, while the newly-enrolled student will presumably benefit from some sort of subsidized tuition rate.
The same is true here. The so-called “typical” family that Conover describes already receives health care insurance through their employer. The existence of 30 million newly-insured people — many of whom will receive tax credits if they purchase insurance in the law’s exchanges — won’t do much to move their premiums in one way or another. (Health advocates hope that the law will slow the rate of growth in health care spending, but that’s a long-term proposition.)
In fact, if anything, the CMS report that Conover links to shows that Obamacare is a good financial proposition. In 2022, total health care spending will increase by 1.5 percent, while the number of non-elderly adults with health care coverage will increase by 9 percent. That’s a pretty good deal any way you slice it.
Most Americans get their insurance through either the government or an employer, which absorbs a lot of that cost. Every dollar in higher costs (which happens in 30 million people get health insurance) does not equal a dollar higher premiums. Systems as large as the American health insurance industry under the Affordable Care Act have methods of spreading that cost around.
That's like saying if the price of oil goes up a dollar, the price of gas goes up a dollar too. By that math, gas in the US should be $100 a gallon, but not every single dollar in oil increases gets passed along to the gasoline consumer at a 1:1 ratio.
But that's what Conover claims will happen with Obamacare. And since we already know that Republicans pretty much don't believe in science or math (unless it somehow "proves" the Earth is 6,000 years old and that white people are genetically superior to everyone else) why are we surprised by this?
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