Obamacare Won’t Bring Down Costs

Experts say ACA fails to address problem of skyrocketing health care costs

Senate Finance Committee Chairman Sen. Max Baucus / AP
June 18, 2013

President Barack Obama’s Affordable Care Act fails to address the problem of escalating health care costs, according to testimony by health care experts at a committee hearing Tuesday.

Steven Brill, a health care writer and contributing editor to Time, told members of the Senate Finance Committee that while the act, more commonly known as Obamacare, may extend coverage to some currently uninsured Americans, it does not include measures to curb rising insurance premiums or the cost of providing medical services.

"Obamacare does not address the fundamental problem, which is the high prices," Brill said.

The committee scheduled the hearing to discuss Brill’s 26,000-word article, "Bitter Pill: Why Medical Bills Are Killing Us," which investigated why health care costs continue to skyrocket.

Brill found that providers, drug companies, and other health care entities charge widely varying and exorbitant amounts for the same procedure, such as one hospital billing a patient $77 for a box of gauze pads.

Sen. Bob Menendez (D., N.J.) pushed back against the notion that Obamacare would not alleviate these cost issues, arguing that it would lower costs for residents in his home state of New Jersey.

However, Brill said many New Jersey residents would still fall through the cracks of Obamacare regulations designed to limit the costs on hospitals’ internal price lists, or "chargemasters."

"It doesn’t eliminate the fact that somebody, now the taxpayer, is going to pay that $13,700 for a drug that costs the drug company $200," Brill said.

Recent reports that Obamacare will significantly raise premiums in some states and potentially increase rates for low-income workers highlight Brill’s concerns. The Obama-campaign-turned-activist-group Organizing for Action announced a seven-figure ad buy Monday to defend the health care law’s supposed benefits.

Sen. Bill Nelson (D., Fla.) pointed out that another unintended consequence of the law is the consolidation of health care firms. Hospitals buy physicians’ practices to share information and achieve economies of scale, but only end up further masking costs, Nelson said.

"It’s a way of consolidating power by he who owns all the providers of services," he said. "This is contrary to the kind of competition we were trying to create in Obamacare."

The model of hospitals buying up physicians and paying their salaries tends to eliminate doctors’ incentives to work harder, said Dr. Giovanni Colella.

Colella, CEO and cofounder of Castlight Health, a company that provides employers with price variations of medical procedures, said the best solution is to allow entrepreneurs like himself to develop the models for lowering the cost and enhancing the quality of care.

"I would ask anybody to show me a free market where the prices don’t go down," he said.

Committee Chairman Max Baucus (D., Mont.) noted that the consolidation of health care entities appears to result in nicer facilities with higher prices and salaries and more buildings.

Brill cited a McKinsey study in his article that hospitals only earn a 2 percent profit margin on inpatient care, suggesting that profits are often not directed toward improving quality.

Like higher education or any other market where the gap between what consumers pay and the cost of the service widens, inefficiencies result, Brill said.

"We’re not talking about evil people here. We’re talking about a marketplace that just doesn’t work," he said.

"When marketplaces don’t work, people tend to maximize their income."