January 7 2014

Slowed Healthcare Spending: What's the Real Reason?

Patrice J. Lee

National spending on healthcare grew less in 2012, continuing a decline in growth rates, according to a report released by the Centers for Medicare and Medicaid Services yesterday.

Not willing to squander a moment for self-aggrandizement, the Administration was quick to jump on the report saying that its health care reform plan has helped to stop the trend of rising health care costs. The President will also use it as ammunition to forge ahead with an ObamaCare enrollment push in advance of the next big deadline: March 31.

Here is more from the report:

For the fourth consecutive year, growth in health care spending remained low, increasing by 3.7 percent in 2012 to $2.8 trillion. At the same time, the share of the economy devoted to health fell slightly (from 17.3 percent to 17.2 percent) as the nominal gross domestic product (GDP) grew by 4.6 percent. Faster growth in hospital services and in physician and clinical services was mitigated by slower growth in prices for prescription drugs and nursing home services. Despite an uptick in enrollment growth, Medicare spending growth slowed slightly in 2012, mainly due to lower payment updates. For Medicaid, slowing enrollment growth kept spending growth near historic lows. Growth in private health insurance spending also remained near historically low rates in 2012, largely influenced by the nation’s modest economic recovery and its impact on enrollment.

And here is what the Administration had to say in a blog post:

“For years, healthcare costs in America skyrocketed, with brutal consequences for our country. Escalating costs hurt our economy, eating into workers’ wages and holding back hiring.  They contributed to our deficits, and crowded out crucial investments like education and maintaining a world-class infrastructure.  And they've taken money directly out of consumers' pockets, with Americans paying far higher health care prices than others around the world for no better outcomes.

“The Affordable Care Act, for the first time in decades, has helped to stop that trend.”

Does this feel like déjà-vu? It’s because we saw similar findings last spring and summer. Both times the Administration took credit.

There is no question that health expenditures are slowing and that this slowdown is positive. But can we attribute it to the UnAffordable Care Act? In some ways yes, we can, but that’s not such a good thing.

In the spring experts at the Kaiser Family Foundation, a leader in health and health policy research, found that three-quarters of the health care spending slowdown was due to the lackluster economy.

People spend less on healthcare in weak economies because they have less discretionary funds. When you lose your job or have your hours cut, you’re less likely to see the doctor and more likely to nurse your own ailments. Big out-of-pocket expenses are undertaken far more cautiously.

If the President wants to take credit for a slow economy than by all means he should do so! However, that’s not an accomplishment to hang his hat on.

The rest of the slowdown they attributed to measures put in place by ObamaCare that drove healthcare insurers and providers to curb their spending. The majority of ObamaCare provisions do not kick in until this year and 2015, so it’s disingenuous to take credit, but the fear of what’s to come has driven preemptive measures including raising deductibles and co-pays, shifting toward high-deductible plans, instituting disease management or wellness efforts to keep workers healthier, and limiting what they spend on administrative costs among other things.

Kaiser predicted healthcare costs will rise and I agree. If the economy improves and people feel more secure in their jobs, they will resume their healthcare usage patterns. Patients with new healthcare coverage under ObamaCare will begin using healthcare services for visits and procedures and that they had avoided in the past. New regulatory burdens will take effect as well. So these cost savings are likely short-lived.

And there is a big heard of elephants in the room: 79 million aging Baby Boomers. Just wait until their doctor’s bills start rolling in.

 

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