GOP, citing new report, says health law has not controlled costs

The report says higher spending stemmed from higher underlying costs — not from more people using the healthcare system.

The Health and Human Services Department defended the healthcare law and said costs are indeed rising more slowly than they did in the years before healthcare reform.

“The health care law is already saving money for consumers,” an HHS official said. “Rules that hold insurance companies accountable for high premium hikes and prevent them from spending too much of your premiums on overhead and bonuses have saved consumers $2 billion.”

The health law requires insurance companies to spend 80 or 85 percent of their premiums on medical costs, leaving only the remaining 15 or 20 percent for administrative costs and profit. HHS and other supporters say the provision will help ensure that consumers get value for their premiums.

But Health Care Cost Institute Chairman Martin Gaynor told Bloomberg News that the new rules might contribute to rising healthcare costs, rather than helping to lower them. Critics of the requirement say insurers that want to collect higher profits won’t have a strong incentive to control healthcare costs.

The HHS official also cited the Kaiser Family Foundation’s estimate that healthcare premiums will rise 4 percent this year, less than they increased in 2011.

The Health Care Cost Institute looked only at the underlying cost of healthcare services and did not break out premium increases alone.