Health Care

Ouch, bill for ObamaCare coming due

President Barack Obama signed the Affordable Care Act in the East Room of the White House in Washington in 2010.

President Barack Obama signed the Affordable Care Act in the East Room of the White House in Washington in 2010.  (AP Photo)

The bill is coming due for ObamaCare and it’s a whopper. According to Medicare Care’s own actuaries U.S. health care spending is about to rocket.

Federal meddling in what was once the finest and cost-effective health care system on the planet is nothing new. 

Back in the 1960s, many Americans paid for doctor and hospital services out of pocket or through modestly priced private insurance. Health care spending was about 6 percent of GDP.


Enter President Johnson and Medicare. He bought millions of votes by giving seniors free health care that they never paid for through payroll taxes during their working years. As insidious, he helped lay the foundations for the entitlement state with Medicaid. The latter, first conceived to help poor children, has been gradually expanded to include many working families.

Today health care spending is more than 17 percent of GDP. Life extending treatments are part of the jump, but Germany and Holland spend about 12 percent and have those, too. The extra U.S. costs are federally mandated giveaways, inefficiencies and abuse.

Federal programs set reimbursements for providers and limit use of many drugs and procedures. Those rules are intended to mirror market prices and informed private decisions but often do not.

No bureaucratic rule or computer program can even capture all the judgments we put into purchasing decisions to maximize what we squeeze from our incomes to meet our family’s needs. Those decisions build up to become what economists call the invisible hand of the marketplace that guides businesses to make what we need.

Just as Soviet central planning failed to put enough TVs and beef on store shelves, federally managed health care creates long waits to see doctors and lots of opportunities for soft fraud—activities by health care providers that game federal rules—and outright stealing.

For example, Medicaid pays doctors a small fee for drawing blood but labs pay doctors handling fees up to six times as large to get their business. Doctors prescribe questionable, expensive treatments that may be administered in their offices and push up Medicare reimbursements into the millions for each practice.

Before ObamaCare, federal and state governments were already financing about half of all health care spending. At that level, federal reimbursement rates and rules no longer mirror the market—those become the market. The decisions of private insurers—each much smaller by dollars spent than federal outlays—fit in around those.

It was already Soviet-style health care but without the benefit of free access, as private premiums, deductions and co-pays soared.

Now ObamaCare is throwing new sand into the gears by fining individuals who lack employer provided insurance and fail to purchase a plan from the government marketplace.

No surprise, next year those policies are expected to jump in cost by as much as 30 percent. Medicare actuaries are forecasting health spending will rise at 6 percent a year over the next decade and are on pace to reach 20 percent of GDP by 2025.

Small businesses are shedding employees and larger ones are scrambling to find machines to replace lower paid workers—or leave the country altogether—to escape the burdens of health insurance.

The Obama administration has obfuscated the issue. Government numbers show Medicare expenditures growing more slowly—but that’s because the new law raises premiums, cuts benefits and slices reimbursements to doctors and uses the cash saved to subsidize the federal and state insurance exchanges.

Burdensome health care costs are driving private investment from the United States, and is an important reason why growth is so slow, good jobs are scarce, and America is losing its brand.

The United States, once the home of free markets, is no longer the most vibrant economy on earth. It’s China, where bureaucrats are better at imposing the tyranny of a state managed economy.

Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland.