Healthcare Costs on the Rise Under Obamacare

Blog Post - Healthcare Costs on the Rise Under Obamacare

inflation (Consumer Price Index minus food and energy prices) is on the rise in the healthcare industry.

The three measures that most analysts and commentators use to gauge whether healthcare costs are on the rise are total healthcare spending, medical care costs and the costs of providing health insurance (Forbes), and all three are on the rise (CNN).

Both medical care and health insurance have been steadily increasing:

In January, health insurance rose 1.8% and is 4.8% higher than a year ago (BLS)

Medical care costs in the same year have risen 3% (BLS)

The subsidies have helped lower prices but the inflation calculation takes into account government spending as well (investors).

The deep decline prior to the eventual rise can be explained by a lack of demand in a slow economy as well as the restructuring of plans with much higher deductibles, raising out-of-pocket expenses. Although these plans existed prior to Obamacare, the law made them far more prevalent than ever before (Forbes). These one time factors seem to be coming to an end.

The increases may give the Fed the excuse they are seeking to increase rates sometime in the coming year if these inflationary trends continue and would certainly effect the tepid economy we have had since the Great Recession (CNBC).

However, the Fed pays more attention the the core PCE deflator (Personal Consumption Expenditures) which is inching higher, but slowly. Not fast enough for the Fed to take any sudden action (advisorperspective).

What’s more worrisome is despite the rising premiums, UnitedHealth (UNH), Aetna (AET) and Humana (HUM) are warning of losses in the exchanges which will put pressure on further increases in the future (investors).

Obamacare’s added costs have to be paid by someone, and simply redistributing wealth from one person to another (subsidies) negatively impacts savings and investments in the private economy, lowering total output.

Medical professionals as well as insurance companies are finding ways to pass these on to the consumers, but in the case of the insurance companies, not fast enough.

Sources:
http://www.forbes.com/…/06/the-coming-healthcare-inflation/…

http://money.cnn.com/…/28/news/economy/health-care-spending/

http://www.advisorperspectives.com/…/up…/PCE-Price-Index.php

http://www.bls.gov/news.release/cpi.nr0.htm

http://www.cnbc.com/…/medical-cost-inflation-highest-level-…

http://www.investors.com/…/cpi-flat-in-jan-as-obamacare-bo…/

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