Will Health Care Reform Create Affordable Health Insurance Rates?

Published: Thu 25 Mar 2010

President Obama's overhaul of the country's health care system will help low-income and sick Americans secure and retain health insurance. What remains to be seen is whether the reform will lower health care expenses for average Americans, as the White House claims it will.

Health care costs are rising rapidly-increasing 5.7 percent last year, while the economy decreased by 1.1 percent, according to the Centers for Medicaid and Medicare Services. In the coming decade, health care spending is expected to increase 6.1 percent, topping $4.5 trillion, or almost 20 percent of the nation's economy.

Certain skeptics and even advocates of health care reform claim that the law won't do enough to reverse that trend. The medical insurance industry, lambasted by Obama for recent rate increases in California and other states, contends that the real problem is the prices hospitals, doctors, and drugmakers charge.

"The cost crisis needs to be addressed," argues Karen Ignagni, America's Health Insurance Plans president. "Underlying health care costs are exploding."

The White House Argument

The White House has contended that demonstration programs and pilot projects injected into the legislation will yield far more in savings in the long run than anyone can offer currently. The Congressional Budget Office can't verify that many of those savings will occur, so it doesn't include them on the balance sheets.

Peter Orszag, the White House budget director, explains that the new legislation will, eventually, guide the health care system toward billing for the quality of care instead of the quantity. Consequently, that will drive costs down for all Americans, he says.

"The key thing for our fiscal future and for slowing cost growth over time is reorienting the system towards quality," Orszag explains. "This is the single most consequential piece of legislation that moves in that direction in the history of the country."

Ways to Keep Insurance Costs Down

Multiple initiatives included in the law are designed to keep costs down:

Pilot programs endorse hospital and physician services under a single roof, similar to the Mayo Clinic, in addition to paying for the effective management and prevention of diseases. That is a shift from the current practice of paying for each medical test or doctor's visit.
An Independent Payment Advisory Board will research and provide recommendations on keeping down both Medicare spending and private-sector costs.
A demonstration program will investigate the efficacy of various medical procedures so physicians and other medical providers can use the best practices.
The law will create programs to streamline insurance codes, forms, and billing practices to make them more uniform. A minimum of 85 percent of group insurance plan premiums and 80 percent of individual plan premiums must be devoted to care. Insurance companies who do not meet that standard must offer refunds.

Pilot Programs May Produce Big Savings

Some health care experts believe that the pilot programs may yield large savings in the coming decades.

"If we do this right, we should be paying way less than we would have been paying," comments Len Nichols, a professor of health policy at George Mason University in Virginia. "Fundamentally, we have got to change incentives. The most important part of the bill is the signal that business as usual is over."

More Health Care Reform News

Will Health Care Reform Create Affordable Health Insurance Rates?

The White House Argument

Ways to Keep Insurance Costs Down

Pilot Programs May Produce Big Savings

More Health Care Reform News

Recent Articles