Get PolitiFact in your inbox.

MSNBC host Ed Schultz points to a drop in a couple of health care price indices to show that Obamacare is pushing costs down. MSNBC host Ed Schultz points to a drop in a couple of health care price indices to show that Obamacare is pushing costs down.

MSNBC host Ed Schultz points to a drop in a couple of health care price indices to show that Obamacare is pushing costs down.

Jon Greenberg
By Jon Greenberg March 28, 2014

Ed Schultz: Obamacare is driving costs down

As the country heads into the 2014 election, Republicans are ratcheting up -- to the extent it’s possible -- their attacks on Obamacare.

But MSNBC host Ed Schultz is urging Democrats to stand tall.

"Democrats need to embrace Obamacare. Don't be afraid to run on it in the midterms," Schultz exhorted. "Don't pay attention to the predictions, pay attention to the results, pay attention to the numbers, explain that in a town hall meeting, and they will be cheering Democrats."

Schultz said the facts are clear. Four years after the program began, it is working.

"Health insurance costs and medical care costs fell sharply in January, ding, ding, ding," Schultz crowed. "For the first time in decades, we finally have this: Health care costs are going down because of Obamacare."

The claim that the Affordable Care Act is reducing health costs been made before. It’s been a year since PolitiFact looked into it so it seemed time for an update. And since Schultz mentioned health insurance and medical costs, we can pull back the curtain a bit on how the government tracks these changes.

As Schultz spoke, a large chart behind him showed the declines he was talking about. It showed that by a measure called the price index, insurance prices fell 0.4 percent in January and health services dropped 0.1 percent.

Technically, the full name of this yardstick is the Personal Consumption Expenditures Price Index, and the first thing to note is that a price index is not the same as the cost. We'll get into that in just a bit.

Schultz got those numbers correct (they came from the Bureau of Economic Analysis), but the analysts we reached told us you have to be careful focusing on any single month.

A broader picture of the insurance price index shows a much bigger decline about a year ago followed by a steep rise. In short, the index fluctuates -- sometimes wildly, said Jim Dolmas, a senior research economist at the Federal Reserve Bank of Dallas who has written articles about price index measurement.

"Because these series do jump around, it’s a good idea to never put undue weight on any one month’s observation," Dolmas said.

Here’s a look at what Dolmas is talking about.

Source: Goldman Sachs and Commerce Department, via Washington Post


As you can see, isolating any one month is problematic. But so is using the index to measure health care costs at all, we found.

The health services index measures how much providers are paid, which includes what they get from patients and insurance companies.

"There are lots of pieces that go into the construction of these, and they don’t always match neatly with what consumers may see out-of-pocket," Dolmas told PunditFact.

What other numbers show

The fact is, determining the impact of Obamacare on health care costs is difficult, if not impossible, because enough data isn’t available.

Some numbers, like the index, suggest a decrease.

But others do not.

Tim Dall, a health economist at the financial consulting firm IHS, pointed to data from the Bureau of Labor Statistics that adjusts for seasonal variations. The BLS figures show that overall medical inflation remained at a constant 0.2 percent for December, January and February.

"It’s a stretch to say that a blip in January shows that the Affordable Care Act is holding down costs," Dall said. "It should drive down costs in the long term, (but) it will be years before we know the impact on health care use and cost."

Jack Rodgers, managing director of the Health Policy Economics Group at PricewaterhouseCoopers, a large accounting and financial consulting firm, confirmed that the price declines are real, but he said that doesn’t mean health costs have also gone down.

"Even if the price index reflects the appropriate average price, costs are probably growing," Rodgers said. "Because more people are using services, and those who are using services are using more on average."

In fact, total monthly health care spending rose by 1.6 percent in January, according to the Bureau of Economic Analysis.

Does this mean that the Affordable Care Act has had no effect? No, but teasing out those impacts today has proven difficult.

Analysts need to separate Obamacare from the other factors that have been working on the health care industry. The view among most researchers is that the sluggish economy has played the largest role. "About three-quarters of the recent decline in health spending growth can be explained by changes in the broader economy," the Kaiser Family Foundation, an independent Washington-based research group, concluded last year.

One of the problems in the debate over the effect of the Affordable Care Act is that it takes a while for the data to appear. The latest report on health spending from the Centers for Medicare and Medicaid Services describes what happened through 2012. It found that health care spending rose by 3.7 percent. On the plus side, that was the fourth year in a row that the growth rate stayed low and health care’s share of the economy dropped a hair to 17.2 percent.

We should note that health care analysts think the new health care system could reduce costs in the long run. They credit Obamacare with moving hospitals and doctors away from frequent use of expensive specialists and toward a system that rewards improved outcomes at reduced costs. Smaller increases in Medicare payments to providers that are part of the law could be holding prices in check. But the consensus is that more durable proof of the law’s impact is yet to come.

Our ruling

Schultz said health care costs are going down due to Obamacare. Government data show decreases in January for the price of health insurance and health services. However, those measures can bounce around and if Schultz had looked a few months further back, he would have seen even steeper declines, followed by later increases. Plus, a drop in a price index doesn’t always translate into a lower price for the customer.

Most analysts judge health care costs not by prices but overall spending. By that measure, costs continue to rise, albeit slowly. The impact of the Affordable Care Act on containing the cost of health care remains largely unproven.

Schultz had some accurate numbers on prices but he was too quick to treat those as changes in costs and the role of the Affordable Care Act is sketchy for the time being. We rate the claim Mostly False.

Our Sources

MSNBC, The Ed Show, March 24, 2014

Quartz, Yes, Obamacare is driving health care costs lower,  March 4, 2014

Bureau of Economic Analysis, News release: Personal income and outlays - January 2014, March 3, 2014

Pricewaterhousecoopers, Factors affecting the 2014 medical cost trend, June 17, 2013

Centers for Medicare and Medicaid Services, National Health Expenditure Accounts, Jan. 7, 2014

PolitiFact, Nancy Pelosi says Obamacare is bringing down health care costs, May 16, 2013, Obama’s Numbers (January 2014 Update), Jan. 15, 2014

Kaiser Health News, Detailed report deliver good news on health costs, but will it last?, Jan. 6, 2014

Bureau of Economic Analysis, Real Personal Consumption Expenditures by Major Type of Product, March. 3, 2014

Wall Street Journal, Medical-Price Inflation Is at Slowest Pace in 50 Years, Sep. 17, 2013

Kaiser Family Foundation, How Obamacare May Be Holding Down Costs, Sep. 27, 2013

Kaiser Family Foundation, Health Cost Growth Is Down, Or Not. It Depends Who You Ask., March, 5, 2014

Avalere Health, Consumers Face More Hurdles to Accessing Drugs in Exchange Plans Compared to Employer Coverage, March 24, 2014

Bureau of Labor Statistics, Consumer price index for all urban consumers, March 18, 2014

Washington Post, Three early signs of what Obamacare means for consumers, March 4, 2014

IHS, CMS report demonstrates slowed US healthcare spending in 2012, Jan. 7, 2014

Federal Reserve Bank of Dallas, Behind the Numbers: PCE Inflation Update, January 2014, March 3, 2014

Email interview, Jim Dolmas, senior research economist, Federal Reserve Bank of Dallas, March 27, 2014

Email interview, Jack Rodgers, managing director, Health Policy Economics Group, PricewaterhouseCoopers, March 27, 2014

Email interview, Tim Dall, health economist, IHS, March 27, 2014

Email interview, Jeffrey Clemens, economist, University of California - San Diego, March 26, 2014

Email interview, Austin B. Frakt, associate professor, Boston University School of Medicine, March 27, 2014

Browse the Truth-O-Meter

More by Jon Greenberg

Ed Schultz: Obamacare is driving costs down

Support independent fact-checking.
Become a member!

In a world of wild talk and fake news, help us stand up for the facts.

Sign me up