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 sits with Senior Advisor to the President Valerie Jarrett before President Obama spoke on the Affordable Care Act in the Eisenhower Executive Office Building December 3, 2013.
National Journal
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Sophie Novack
Jan. 2, 2014, 1 a.m.

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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