Last Thursday was a watershed day for the Kellogg School of Management and Northwestern University. For the first time in 60 years, a sitting President spoke at NU, as President Obama spoke before an audience packed largely with Kellogg students and faculty. As this is election season, it was no surprise that he spoke at length on a variety of issues and defended the Democratic record. We are not experts on every matter of public policy and therefore will not examine every aspect of the speech. But we have more than passing knowledge of health policy, and the President did spend some time discussing the ACA. He also mentioned many times that he was simply giving the audience “the facts” and that they could not be disputed. Given this speech occurred at our University, we feel obligated to take a look at what he said and do some basic “fact” checking.
Here is the relevant excerpt from his speech:
“Today, we’ve seen a dramatic slowdown in the rising cost of health care. If your family gets your health care through your employer, premiums are rising at a rate tied for the lowest on record. What this means for the economy is staggering. If we hadn’t taken this on, and premiums had kept growing at the rate they did in the last decade, the average premium for family coverage today would be $1,800 higher than they are. That’s $1,800 you don’t have to pay out of our pocket or see vanish from your paycheck. That’s like a $1,800 tax cut. And because the insurance marketplaces we created encourage insurers to compete for your business, in many of the cities that have announced next year’s premiums, something important is happening – premiums are actually falling. One expert said it’s like ‘defying the law of physics.’ But we’re getting it done. That’s progress we can be proud of.”
There is no reasonable interpretation of this section other than the President is claiming that 100 percent of the recent slowdown in private sector health spending is attributable to the ACA. Unfortunately, this claim does not stand up to basic scrutiny. This issue has been extensively researched by both ourselves and a number of other economists. Conclusions drawn from studies of prior recessions suggest that the ACA could be responsible for more than half of the current slowdown in health spending. More significantly, the most recent published work, which focused on differences across geographic areas during the most recent recession, suggests that the ACA is responsible for at most a small fraction of the slowdown in private health spending. We happen to know a lot about this research because we (along with colleague Chris Ody) are the authors of the aforementioned study. We blogged about it last month, and you can find the full study here, in the policy journal Health Affairs. We have also shared this evidence with staff in several Federal agencies, so our findings are not unknown in DC.
We will be generous to the President and assume that these findings somehow did not make it onto his radar screen, or that of his speechwriters, or even more unlikely even his economic advisers.* As a result, the President has, at best, grossly exaggerated the impact of the ACA when the best available evidence is that the ACA may not have had any impact at all! We find it at least a little ironic that the President has (perhaps unknowingly) misrepresented the facts on a subject that was extensively researched by faculty at his host institution.
While we are on the subject of the accomplishments of the ACA, the President has in other venues reminded his audiences that the ACA has reduced the ranks of the uninsured by 10 million. What he fails to mention is that a very large portion of those individuals (perhaps even a large majority) were simply added to the Medicaid rolls of various states. Considering that roughly half of the states chose to sit out the expansion, this is a remarkable figure. While it is a good thing that we are able to provide these people with health coverage, the ACA was billed as a way to utilize the marketplace to expand private health insurance coverage by bringing some order to the individual marketplace. This is a policy goal that dates back to Stanford Professor Alain Enthoven’s 1978 Consumer Choice Health Plan, and was shared by President Clinton as well as many Republicans. We may ultimately get to this point, but we certainly are not there today. Given this fact, why not call the ACA what it is – a massive expansion of the Medicaid entitlement, coupled with an as yet modest program to help some individuals find subsidized private health insurance? We are rather partial to Professor Enthoven’s plan and hope the exchanges grow, but we are a long way from fulfilling his vision. Let’s not pretend otherwise.
*We are reminded of an episode of the great British comedy, Yes Minister, where the Minister for Administrative Affairs Jim Hacker learns, to his chagrin, that he would have been better off politically if he had remained unaware of the facts. Perhaps it is best for the President if he can continue, with conviction, to spin this tale about the ACA.