The Affordable Care Act and Health Care Costs

Article excerpt

A recent study by the Society of Actuaries suggests that under the Affordable Care Act, premiums for health insurance are likely to increase by 32 percent for individual and small group policies. While the study does not fully capture some of the act's cost- control mechanisms, it does highlight a significant challenge for the U.S. health care system: deciding how much to spend to keep any one person alive.

The Affordable Care Act is bringing significant changes to the U.S. health care system. It will provide government funding vehicles to extend coverage to 30 million Americans that are currently uninsured, establish insurance exchanges, promote the creation of Accountable Care Organizations and also provide funding for start- up insurance companies referred to as co-ops. However these different initiatives are unlikely to reduce the cost of care.

In the political debate, insurance companies make an easy target to blame for costs and lack of coverage. But the insurance companies are the least responsible for the significant increase in the cost of care over the past four decades. Instead the increase primarily comes down to two factors: technology and utilization. The Affordable Care Act, for all of its new initiatives and new thinking, does very little to address technology and utilization, and in some ways creates structures that will increase utilization.

We have a vast and increasing range of health care services available, and these services get used by more and more people. Every year doctors come up with new procedures to fix maladies we used to have to live with and new technologies to save people that once would have died. And technology options and costs are likely to continue going up, with new advances in genomics, new ways of treating the ravages of age and keeping death at bay. Many of these treatments are extremely expensive but extend life only a few months.

Sixty years ago, there wasn't all that much doctors could do to save people and it was easy to make an open-ended commitment, to promise to spend any amount necessary to keep a person alive. …