There appear to be several reasons for the decline in the health care cost inflation rate with a poor economy and resulting job loss and changes in benefit design often cited – rightly – as chief contributors. There’s some fear that an improving economy and higher employment will return us to the ugly days of 7+ percent health inflation rates.
Possibly. However there are indicators that changes to provider-payer contracts, a reduction in unused facility capacity, growth in medical homes and ACOs, changes in reimbursement methodologies, and less reliance on new technology are having an impact. These factors, and others unknown, look to be responsible for more than half of the decrease in inflation.
Here’s how the authors of a recent article in Health Affairs put it:
“we believe that current trends support cautious optimism that the spending slowdown may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country, among other factors.”
The implications are vast. At the highest level, lower medical trend allows employers and their employees to use cash for other purposes, alleviates some of the pressure for Medicare reform and reduces deficit and debt projections.
This last may be the most significant implication – an analysis indicates public-sector health spending over the next ten years may be $770 billion lower than projections.
What does this mean for you?
Those of us with grey hair and fading eyesight have seen too many of our hopes for cost control crushed to get overly excited. Nevertheless, this is far better than the proverbial stick in the eye…
Joe-
We also need consumers to understand that their over-utilization f health care services is not getting them better outcomes.This requires a focused public awareness campaign. The savings from this is maybe 30% or more according to a number of detailed analyses. But the evidence is strong — from the earlier RAND studies and the recent Oregon Medicaid results– that more comprehensive first-dollar insurance and using more health care services generally does not produce better health outcomes.
We also need structural changes by Medicare and insurance so that consumers have the option of only getting catastrophic — a type of coverage that ACA iin effect prohibits except for HSA plans.
I think there will be small savings from ACOs. We have seen this movie before with HMOs. Sure they will deliver better care (with higher costs) of coordinated care for the chronically ill which they will off-set by lower costs of avoidable ER and inpatient stays and less specialist services. But overall only slightly lower costs.
Medicare has not made reimbursement changes that address huge areas of waste. They have not made payment changes that address the huge costs of over-aggressive end-of-life care (which might start to be addressed by reducing what Medicare pays to the average costs of the most cost-efficient quartile of providers vs the current practice of reimbursing based on the average costs of all providers which skews reimbursement upwards by the most expensive outliers). Nor has Medicare, as you have pointed out repeatedly, addressed over-paying pharma (why we do not adopt a drug purchasing approach like that of the French government but persist in paying European pharma cos. as much as 20X the price that they charge their own governments for the same drugs baffles me),
Nearly every issue facing our economy and finances at some point intersects with the problem of rising healthcare costs. Now that is somehow brought under control. Because health-care spending has been the fastest growing sector in most state budgets, the slowdown of medical inflation is also welcomed in state capitals across the country. And, it is good news to businesses that fund most private health insurance premiums.