Read This Before You Judge Obamacare

The Patient Protection and Affordable Care Act, otherwise known as Obamacare, is one of the most hotly contested pieces of legislation perhaps ever, but there is one thing people need to know before they make a judgment of the controversial plan: The nightmarish financial path that was the status quo.

An unsustainable path
There is no denying that the cost of health care in the U.S. has been traveling on an unsustainable path for the better part of the last 50 years. Consider the U.S. government's spending on health care as shown in the chart below:


Source: Bureau of Economic Analysis.

While it's easy to think that because of inflation, it's obvious that chart would look odd, but when shown on a comparable scale to total federal government spending, you can see how dramatically the spending on health care has outpaced total spending:


Source: Bureau of Economic Analysis.

Health care expenditures of the federal government have risen on average by 12.4% per year since 1959, whereas total expenditures have only risen by 7.4% -- a 5% difference. But it isn't simply the government that's spending more on health care -- individual Americans are, too.

Consider that the personal spending on health care has risen from $1.2 trillion in 1999 all the way to $1.7 trillion in 2012, an increase of 50%. This is all while all other expenditures (excluding health care) have only grown by 33%:


Source: Bureau of Economic Analysis.

Yet it isn't as though the average American can easily keep up with this unsustainable growth in health care spending, as the median household income in the U.S. has actually fallen by almost 10% over the same time period:


Source: St. Louis Federal Reserve.

All of these trends led the bipartisan Congressional Budget Office (CBO) to estimate that while the U.S. currently spends 17% of its GDP on health care and related services, that number would balloon all the way to 40% by 2080. Even more troubling, it isn't even as though our health care system has led the to the best outcomes -- a healthier public -- as Bloomberg recently noted, "the U.S. spends the most on health care on a relative cost basis with the worst outcome."

No matter what you think of Obamacare, it's clear that something needs to be done about health care in the United States.

Moving forward
In all of this, we can see why President Obama and many politicians of both parties were so keen on attempting to change the health care system. There is no denying that the current rollout of Obamacare has seen problems, and it may in fact not even be the best solution. But there is also no denying that the health care system in America was (and still may be) spiraling out of control.

Many want to say that simply getting rid of Obamacare would fix all of our current problems, but the previously mentioned CBO also noted that repealing the Affordable Care Act -- as proposed in 2012 by John Boehner -- would actually increase the Federal Deficit by $109 billion between 2013 and 2022.

A June 2011 paper from the National Bureau of Economic Research, Jonathan Gruber, a former Mitt Romney advisory, noted simply when discussing the Affordable Care Act; "[w]hether these policies by themselves can fully solve the long run health care cost problem in the United States is doubtful. They may, however, provide a first step toward controlling costs -- and understanding what does and does not work to do so more broadly."

The reality remains that it is entirely too early to tell what the ultimate impact of Obamacare will be and whether or not it will be a success or a failure. But what we all must know is that health care in the U.S. needed to change, radically, as it was leading our country down an unstable path.

Understanding Obamacare
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  • Report this Comment On December 21, 2013, at 1:23 PM, SkepikI wrote:

    <But what we all must know is that health care in the U.S. needed to change, radically, as it was leading our country down an unstable path.>

    AND it still is. Very likely based on early results a MORE unstable path fraught with mistakes, bad management, fraud and identity theft, mmm what am I missing here....

    The first rule of problem solving is to not make it WORSE. Which the ACA has apparently done.

    Patrick, much like others at the MF, if you are going to write about this subject, you need to keep up with the current facts of the MANAGEMENT (not just the website) disaster that is the ACA (or Obamacare if you prefer)

    Peeling the onion back one layer at a time, and dripping out bad news while covering up the true proportions of this disaster is the order of the day. And, that ought to give you pause about the veracity of the recent year or two of your charts. If it doesn't, the word gullible comes to mind.

    Burried deep in the fluff of today's Front page story about CoverOregon (Cover up Oregon) is this line:

    "Out of more than 65,000 applicants, the [page break to back section] exchange reports enrolling 30,000 but only 11,000 of them in private insurance plans" HUH?

    That means less than half of the applications have been processed.

    That means OVER half of the processed ones -nearly 2/3 have been pushed into the public funded Oregon Health Plan that the state controls.

    That means the remainder may or may not have insurance as the exchange previously admitted they are unable to properly transfer information to private insurance companies so they count "enrolled" as when the enrollment paper is processed and completed, not when the private insurance companies issue a policy and the individual pays for it. This is when an individual actually HAS insurance.

    I question the honesty of Cover Oregon. I question the honesty of the ACA, the entire structure at Sebilius' palace. PLEASE don't make me question your honesty and that of the MF.

    I think maybe Alexandria is way too close to DC...

  • Report this Comment On December 21, 2013, at 1:29 PM, SkepikI wrote:

    ^ BTW for those who are not following the Oregonized disaster. 65,000 applicants out of a total population of nearly 4 million. 30,000 "enrollments" most of which come from letters mailed in advance of the roll out to 55,000 Food Stamp (SNAP) recipients that basically said, we know you qualify, you don't have to apply just let us know and we will sign you up for FREE. Obviously, less than half bothered to respond to a solicitation that required almost no work, no money and no vetting.

    I wonder what the fraud quotient is for that???

  • Report this Comment On December 21, 2013, at 3:13 PM, dragonite9009 wrote:

    Don't be so silly and illogical -- BOCare has nothing to do with lowering costs. No one in DC has a clue how the real world works and lives. It is all about controlling us to suit their agenda.

  • Report this Comment On December 21, 2013, at 5:28 PM, doogiem wrote:

    great bit of info, charts and all, but it all means nothing. Other methods could have, should have, been done but for unknown reasons the left thought this a better system. yes know the right did not push hard enough either, so all are at fault. I dont care about the roll out, all that can be fixed. It is the cost to the consumer in higher fees or payments which ever you prefer, higher deductibles into the five figures, lesser quality of care, and a boondoggle of which no one knows what is going on. It all goes back to one question, please, name me one agency, entity, that the government runs efficiently, effectively, and not with 100% over run. Quick answer there is none, so why is this going to be any different.

  • Report this Comment On December 21, 2013, at 5:44 PM, PictouGene wrote:

    doogiem:

    Air Traffic Control; Social SEcurity Administration; US Department of Agriculture; Coast Guard; US Centers for Disease Control...should I go on?

  • Report this Comment On December 21, 2013, at 7:12 PM, Tommylee2 wrote:

    Yes government costs are up. Why? Because they got involved in trying to regulate every aspect of it and forced prices to rise. Out put is more than before? Certainly, there are more seniors now living longer than ever and when the government forced them onto medicare at 65, well, what did you expect?

    Then there comes medicaid which the government forced the states to provide, with them partially backing it. Since they only pay about a third of what is billed the medical profession raised their costs so that they could cover costs and make a profit, so there again, goes government involvement. If the government would get their hands off health care and stick to what they are supposed to do, protect us from our enemies, costs would go back down, people could afford health care again and employers would pay for it again. Alas, the democrat party has a better idea and that is to make everyone pay and pay and pay until they can pay no more and then fined them for not paying. Great plan isn't it?

  • Report this Comment On December 21, 2013, at 7:19 PM, cleangene86 wrote:

    Anyone who thinks Government can manage health care without the cost of bureaucracy increasing cost is a moron. It would be better just to give people money and let them spend it themselves in a competitive market. Give me the choice of a $5000 total hip and a $10,000 one and guess what. Soon we will have a single payer system where everyone gets screwed.

  • Report this Comment On December 21, 2013, at 8:37 PM, lm1b2 wrote:

    Retirees have been told all along that are medicare would not be effected by Obamacare,yet i,and my wife got notices from social security 12/20/13 that we would be getting less money monthly because our Medicare Medical Insurance,and our Medicare Prescription Drug plan have gone up in price effectively wiping our 1.7% COLA increase out,and plus !We were never told by Anthem Blue Cross,Blue Shield of any increase,this was a total surprise! Thank you Mr.President for lying to us too!

  • Report this Comment On December 21, 2013, at 8:45 PM, SkepikI wrote:

    <Social SEcurity Administration; US Department of Agriculture>

    @PictouGene: I cant speak to the rest, but who are you kidding with the above?

    SS Admin is regularly defrauded and scamed. They just told an 88 year old vet in my state he was dead. Very much alive, he was scared spitless when his checks stopped and could not "prove" he was alive as he was in the hospital.

    Dept of Agriculture regularly scammed, used to operate US Forest Service at a profit, now soaking up money and burning up trees when wildfires sweep through what they used to turn into cash.

    More if you like, but why bother

  • Report this Comment On December 21, 2013, at 10:33 PM, obumersucks wrote:

    You can post all the charts you want. Come NOV. 2014 you guys are DONE, FRIED, FINISHED, GONE, HISTORY!

  • Report this Comment On December 22, 2013, at 2:08 AM, jon1964 wrote:

    Yet it isn't as though the average American can easily keep up with this unsustainable growth in health care spending, as the median household income in the U.S. has actually fallen by almost 10% over the same time period WHILE THE ELITE INCOME HAS RISEN.

    They said by getting rid of obamacare would actually increase the Federal Deficit by $109 billion between 2013 and 2022. WELL LOOK AT WHAT IT ALREADY COST US and the reason medical care costs are going to rise is because of how much the greedy companies, hospitals and doctors charge, just like the OIL CEO'S getting a $10 BILLION DOLLAR BONUS EVERY YEAR. IT IS LUNACRIST. If it weren't for that and congress voting themselves a raise, things would not be in the shape they are in. All of these things, but not limited to, contribute to the way the costs and economy is. GREED WILL COMPLETELY RUIN THIS COUNTRY AND YOU CAN NOT TAKE IT WITH YOU WHEN YOU DIE.

  • Report this Comment On December 22, 2013, at 3:31 AM, bill4k wrote:

    I can guarantee that if Obama was CEO of a company that was “Obama care” he would not be getting any a $10 million bonus and would be lucky if he still had a job. It is likely that any CEO getting a $10 million bonus is running a successful company, providing goods and services that people actually want and need (because they are buying it). If you don’t like that CEO making $10 million, but do business with that company. I wish I could do the same with Obama care. The government it the reason for the rising cost of health care.

    You think health care is expensive now, wait until it is free!

  • Report this Comment On December 22, 2013, at 7:44 AM, BCarlson wrote:

    The issues with the old healthcare system were widely known. The bulk of opposition to the ACA was driven by the use of the Federal Government to resolve these issues, not that the old system was acceptable.

    Many Americans believe that it isn't appropriate or even legal for the Federal Government to intervene here and that it sets a very bad precedent regarding what the Federal Government can require of its citizens.

    Moreover, many Americans challenge the idea that, in order to resolve any of these issues, we required such a massive piece of legislation impacting the entire system.

    We could have done it with smaller, more targeted legislation at the state level, with minimal Federal intervention. Numerous alternatives were proposed and summarily rejected by Democrats.

    For example, expanding HSAs, in conjunction with tort reform and selling insurance across state lines. Also, establishing State-level, high-risk pools and subsidizing them with both Federal block grants and State funds.

    It should have been done much more intelligently but instead, it was hastily and narrowly passed with no bipartisan support at all. This all but guarantees no bipartisan support in fixing it.

    The ACA has driven Americans further apart in an already highly polarized country. It's bad legislation and bad politics.

  • Report this Comment On December 22, 2013, at 2:00 PM, srlouis wrote:

    This is a very well written article identifying the problems with health care in the USA. The problem with the article is that they have missed the point when they present Obama Care as the solution. Obama Care is the equivalent of a doctor identifying a patient as afflicted with cancer and then recommending heart surgery, because he is a cardiologist. Remember the famous words " a crisis is a terrible thing to waste". This whole health care crisis was no more than an opportunity to seize 20% of the economy for the government and insulate their liberal friend from the horrible out come. They are not subject to the bad effects of the law. So much for equal rights. Obama Care does nothing to reduce the escalation of medical costs, except reducing the availability of health care to certain people. The recommended ways to reduce the escalation of medical costs such as transparency, malpractice caps, elimination of copays, etc.. All these ideas were shunned as a self serving move for the privileged big government advocates, government employees, unionized employees, and employees of large corporations that use stop-loss. This business of the web site malfunctioning is a ploy to put smaller health insurance companies out of business so the government can conspire with the few health insurance companies that survive. We saw the same manipulation by the government in 1990 when they eliminated savings and loans and thrift institution, so they could control the mortgage business and work with a smaller number of banking institution. We saw their reward with the banking bail outs. You can trick the American public some of the time, but you can not trick them all the time.

  • Report this Comment On December 22, 2013, at 2:10 PM, BoxcarWillie wrote:

    Our present system of health care is the best that private health care industry has been able to come up with after over 200 years as a nation.

    It's a total mess [high costs and excessive waste] compared with the systems in the other leading economies.

    The ACA is the worst form of compromise, due in part to the fact that roughly half of our Congressmen are unwilling to contribute what they "might" have to offer in terms of influence and expertise to making it an even better alternative to the current fustercluck.

    Instead, they're saboteurs ...

    Nothing more, nothing less!

  • Report this Comment On December 22, 2013, at 6:06 PM, OldJim51 wrote:

    Patrick Morris misses the major flaws of the ACA. Before it was passes people chose the amount of health insurance they could afford, the options of annual deductibles, coverage, co-pays, sometimes including medications and dental/vision benefits. The insurance applied to those that purchased it, no one else. The ACA ended any hope of the middle class and small businesses to keep the cost under their control. Now the ACA dictates the plans, coverage, deductible, and co-pay with no provision for dental and vision coverage. They middle class and young workers are zapped for higher premiums and less coverage to subsidize the poor. The ACA is social and financial law that applies penalties for non-compliance, just as the Selective Service Act did from the 40s to the 70s.

  • Report this Comment On December 22, 2013, at 8:14 PM, Disgustedman wrote:

    Frankly, I am NOT worried about the costs and conditions...I AM worried about the doctors. Many schools report a drop in students. I can't help but believe they'll choose other fields instead of healing as they'll be forced to take less then what they deserve from this health care debacle.

  • Report this Comment On December 23, 2013, at 12:07 AM, True411 wrote:

    More nonsense from the brain-dead liberals at Motley Fool. ObamaCare doesn't reduce costs, it INCREASES costs.

  • Report this Comment On December 23, 2013, at 11:13 AM, seafbyrd wrote:

    Let's see- the great US political class have shown they can not run Social Security- the steal from Medic Care for Medic Aid, all of these programs are not running in their expected estimates (surprise) and they think they can run the US health Care system and save money- OH-PLEASE! there is NO evidence that the government will ever save any money- their whole record is exactly the opposite. And by the way, when has Socialized Medicine been a good thing? Oh you foolish people, putting a mind numbed political operative between yourself and your doctor. Good luck with the death panels, and maybe you will receive favor from Obama.

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