ObamaCare’s impact on health costs.

“The new federal health care law may eventually ‘bend the cost curve’ downward, as proponents argue. But for now, at many workplaces here, the rising cost of health care is prompting insurance premiums to skyrocket while coverage is shrinking.”

“So mandates probably help explain part of the story. But government-subsidized coverage is likely a large factor too. Yet the response of those who authored the PPACA was not to change the way the government provides coverage. It was to expand the subsidization of generous coverage and, at the same, time, make it more difficult for insurers to weed out waste through activities like fraud prevention and utilization review. A decade from now, I suspect, The New York Times will be telling the same story.”

“At the same time, it’s not clear how hospitals will save money through integration. Many proposed cost-reduction measures–such as new electronic medical-records systems–involve expensive up-front capital investments that may not yield savings.
Further, ObamaCare calls on providers to deliver more care–not less–through the ACOs. The president and his allies hope that elevated levels of primary and preventive care for Medicare patients will head off the need for surgeries or other expensive procedures down the road.”

“In light of all this evidence about the benefits of hospital competition, it might be surprising to learn that the new health reform law will decrease rather than increase competition between hospitals due to the encouragement of Accountable Care Organizations (ACOs). ACOs will not be implemented until 2012, but already hospitals are buying out physician practices to create what amount to, in many locations, geographic monopolies that will restrict patient choice and stifle innovation.”

“One way to think about all this is to see the ACA as a sham of sorts. Long before the passage of the bill public opinion polls consistently showed over many years that the average voter was willing to pay only $100 or so to insure the uninsured. If you think about it, everything that has come out of the White House and other administration officials is consistent with that finding. ObamaCare, we are being told, is one big free lunch. No one’s premium will be higher. No one’s wage will be lower. Millions of people are supposed to benefit and no one is acknowledged to be the slightest bit worse off because of it.”

“If waivers are necessary to keep 733 insurance plans in place now, think of what will be necessary in 2013, when the amount policies must cover in a year will be nearly three times that cost, or in 2014, when full-blown PPACA kicks in and insurers are prohibited from offering a policy without unlimited coverage. The waiver option will be gone: nothing in PPACA gives HHS the authority to waive the statutory ban on annual limits. At the same time, other parts of PPACA will require Americans to have more comprehensive insurance than what they have now. Ineluctably, the result will be to require Americans to purchase insurance packages far more comprehensive and far more costly than what HHS has already determined in 733 cases is too expensive to buy.”

“First, ObamaCare’s restraints amount to nothing more than ratcheting down the price controls that traditional Medicare uses to pay health care providers. Structuring Medicare subsidies in this way — setting the prices that Medicare pays specific providers — makes it very difficult to lower those prices, because the system itself creates huge incentives for providers to organize and lobby to undo those restraints. As I explain more fully in this op-ed from September 2010, Medicare vouchers would change that lobbying game by reducing the incentives for provider groups to expend resources in the pursuit of higher Medicare spending. That gives the Ryan-Rivlin restraints a much better shot at surviving.”

“Bending the cost curve is not a matter of simply paying less for a service. What’s needed is real and continuous productivity improvement in the health sector. Doctors, hospitals, nursing homes, labs, clinics and others finding better ways to deliver higher quality care at less cost. Because if productivity in the health sector does not rise, then payment-rate reductions will simply drive willing suppliers of services out of the marketplace.”

“I will discuss why the Affordable Care Act is much more likely to increase the deficit than
reduce it; explain how the mandates, taxes, and penalties that it imposes on insurers and employers will
increase health care costs and decrease employment; and conclude by exploring the negative effects of
regulatory uncertainty at a time when companies are ‘sitting’ on trillions of dollars in cash that could
be used for job creation.”

Chili’s, the popular chain restaurant, is trimming staff and changing their operating procedures in anticipation of ObamaCare’s new labor costs.