Obamacare Can Actually Cut Costs

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Obamacare is the word on the lips of an entire nation today. The Democrat-sponsored healthcare reform began in earnest this morning when healthcare exchanges opened in order to offer insurance to those who did not have it in the past. The program is a controversial one. Those who favor it point to projections of better outcomes and lower costs as well as more equality. Those against the reform insist the exact opposite.


CNBC ran a piece today on the ways that the Affordable Care Act, commonly known as Obamacare, seeks to cut costs for medical care across the United States. The piece is a controversial one, given the politically sensitive nature of the legislation, but it offers some good information on the program.

Obamacare’s real cost

Part of the objective of Obamacare is to lower spending on healthcare. Spending, according to CNBC, makes up about one fifth of total U.S. GDP. The CBO estimates that Obamacare will cost $1.3 trillion to the U.S. government over the next ten years. The CNBC report goes through a few of the provisions of the law that are supposed to cut healthcare costs.

The provisions include penalizing hospitals who release a large number of patients who are readmitted within a month for heart attacks, heart failure and and pneumonia; making insurers reimburse some money to their customers if they do not spend it on healthcare; a 2015 tax on expensive healthcare plans; the creation of accountable care organizations; and the creation of the Independent Payment Advisory Board.

All of these plans will probably serve to cut healthcare costs in one way or another, but none of them outweigh the single biggest cost cutting measure in Obamacare. Preventing sickness is much cheaper than curing it, and making sure that everyone has access to a doctor increases the use of preventative medicine.

The financial bottom line for Obamacare

There is no projection about the cost structure of Obamacare that comes close to evaluating the program in full, and that makes it difficult to predict how the law will affect healthcare costs in the coming years. Warren Buffett isn’t happy with the program because of its indirect relationship with healthcare costs, and he is not alone.

Obamacare is not a perfect program and it may not even be a good one. The Affordable Care Act has arrived, however. Its success will be monitored for years to come.

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