Here's one surprising way that inflation is slowing

By Paul Brandus

Healthcare costs continue to rise. But they're not rising as fast as they were before Obamacare was passed.

Like some of its recipients, Social Security turns 90 next year. For decades, its opponents have proposed changes or outright reductions to it. Yet Social Security endures, and given the utter dependence that tens of millions have on it, that's a good thing. Social Security has saved countless lives.

Another major safety net program marks a birthday next year as well: It will be 15 years come March that the Affordable Care Act (ACA) more colloquially known as Obamacare, passed Congress after a bitter debate in which Republicans desperately tried to block it.

And like Social Security, opponents are still gunning for it. The latest attack, by former Bobby Jindal, former governor of Louisiana, claims that "Obamacare was built on a lie. It "massively increased the cost of healthcare in America."

Is this true? Jindal's claim, made in a video for the America First Policy Institute, a think tank aligned with Donald Trump, says that health insurance "premiums have increased 80%." Jindal's figures come from a February survey by KFF, a nonprofit, nonpartisan healthcare organization.

KFF's figures do indeed show a sharp rise in healthcare premiums - 74% since 2010, when the Affordable Care Act was passed. But Jindal's video leaves out a key phrase used by Obama during the fight to get it passed, specifically his reference to "bending the cost curve," which Obama predicted would eventually happen.

Here's where context is important. KFF's study also tracked the rate at which premiums have increased-in the years before and after Obamacare's passage. Here's what it found:

2000-2005: 69% premium increase

2005-2010: 27% premium increase2010: Affordable Care Act passed

2010-2015: 27% premium increase

2015-2020: 22% premium increase

2020-2023: 11% premium increase

As the above data show, in the years before the Affordable Care Act was passed in 2010, premiums rose much faster than inflation. Yet the pace of increases was slowing, and has since slowed even further. Looks like Obama was right about costs eventually coming down.

But how much of this is actually attributable to Obamacare? In an interview with MarketWatch, Matthew Fielder, former chief economist for the Council of Economic Advisers during the Obama administration and now a health policy analyst at the Brookings Institution, says the Affordable Care Act was one reason, but it can't be the primary reason, given that premium increases began to fall before the landmark bill was even passed.

Even so, while "the ACA made some contribution to slowing growth in employer premiums, the most important provisions were likely the ACA's provision reducing the prices that Medicare pays for healthcare services; there's evidence that when Medicare pays less, that allows private insurers to negotiate lower prices as well."

He adds: "For what it's worth, the ACA would be a much larger part of the story if we were talking about Medicare. The ACA's changes to provider payments and payments to Medicare Advantage plans are likely a major reason that per enrollee Medicare spending has grown so slower in the post-ACA period. That alone is a big deal: a per capita slowdown in Medicare spending.

Fielder also took the KFF's healthcare data further, breaking it down into average annual increases, adjusted for inflation. The numbers-first reported by the Washington Post-are dramatic:

2000-2010: 5.7% annual increase

2010: Affordable Care Act passed

2010-2020: 2.8% premium increase

2020-2023: 1.1% premium decrease

That last line is not a typo: It shows a decrease in premiums in the first three years of this decade.

To bolster his claim that Obamacare hasn't worked as advertised, Jindal also cited another study, this one from the Milliman Medical Index, which projects not just premiums, but all out-of-pocket healthcare costs. He seized upon the fact that Milliman's data showed that between 2010 (again, when the Affordable Care Act was passed) and 2023, out-of-pocket costs for a family of four have jumped from $18,000 to $31,000, some 72%.

But like the KFF data, Jindal fails to provide context. Milliman's data, which goes back to 2005, shows something similar to KFF's:

2005-2010: 48% increase

2010: Affordable Care Act passed

2010-2015: 36% increase

2015-2020: 16% increase

2020-2023: 8% increase

Once again, the data-from a total separate study-shows the rate of increase falling dramatically since the passage of the ACA. But, like the KFF data, how much of this decline is attributable to Obamacare? Economist Fielder - again an Obama administration alum - says there are several factors, not just the Affordable Care Act. But, he tells me, "There's little reason to believe that the ACA increased premiums," like Jindal charges.

The bottom line here: Healthcare costs continue to rise. But they're not rising as fast as they were prior to 2010, when the Affordable Care Act was passed. Coincidence? You be the judge.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? Write to HelpMeRetire@marketwatch.com and we may use your question in a future story.

-Paul Brandus

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06-03-24 1251ET

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