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The Health Cost Curve Is Bending. Is Obamacare to Blame? The Health Cost Curve Is Bending. Is Obamacare to Blame?

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Health Care

The Health Cost Curve Is Bending. Is Obamacare to Blame?

The rise in health spending continues to slow, but experts are divided over why.

Health and Human Services Secretary Kathleen Sebelius, right, with Senior Adviser to the President Valerie Jarrett before President Obama spoke on the Affordable Care Act, Dec. 3, 2013.(Win McNamee/Getty Images)

photo of Sophie Novack
January 2, 2014

Experts are at odds over what's causing the slowed growth in health care spending, but they can agree that it needs to continue—and also on ways to make that happen.

That's the premise of a study published in the New England Journal of Medicine this week, titled a"Health Care Spending—A Giant Slain or Sleeping?" by researchers at the Commonwealth Fund and Harvard University.

Federal actuaries estimate that real spending on health care increased only 0.8 percent per person in 2012, slightly less than real gross domestic product per capita. Comparatively, since 1960, spending has increased an average of 2.3 percentage points more than GDP growth.

 

The recent slowdown is promising, but analysts remain split over what accounts for the change—and, consequently, how long it will be sustained. The more pessimistic view is that the lower cost growth is a result of the recession and will inflate again as the economy recovers. The optimistic explanation is that measures to control costs might finally be working—including related provisions in the Affordable Care Act.

Regardless of the cause, the U.S. is still paying too much for health care. "Even if spending growth stays low, our current level of expenditures is far higher than we need or can afford," said coauthor of the report and Commonwealth Fund President David Blumenthal. "A wide variety of studies suggest that as much as 30 percent of health spending in the U.S. is wasted."

Fortunately, the authors note, there is a growing bipartisan consensus on how to further control costs through "reengineering" the system rather than restricting services, with an emphasis on both provider and consumer incentives for lower cost care.

Provider-payment reform focuses on moving away from the current fee-for-service model toward more value-based rewards, with incentives that encourage efficient and quality care, rather than quantity. Delivery-system reform involves strengthening health information technology, care for the sickest and expensive patients, and primary care services.

On the consumer side, many experts endorse making health care data more available, and engaging and incentivizing consumers to make better, more informed health care decisions.

Reducing administrative expenses could also cut costs substantially. The ACA has begun standardization of billing and claims forms, but much is left to do.

The authors emphasize the importance of continuing the downward spending curve, and the negative impact on all areas of government and the private sector if health care costs were to return to their higher historical pattern. According to the Congressional Budget Office's  February 2013 estimate, the U.S. would be projected to spend $5 trillion on health services in 2022, and federal health expenditures would increase from $900 billion to $1.8 trillion, or from 25 percent to 30 percent of the federal budget.

Reaching bipartisan agreement on health care policy is no easy task, but with broad consensus on the need to continue cutting health care costs, perhaps the downward trend will continue.

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