Health spend­ing shrinks, may surge next year

Modern Healthcare - - NEWS - By Me­lanie Evans and Paul Demko

U.S. health­care spend­ing is on track to shrink 1.4% this year, ac­cord­ing to a re­vised es­ti­mate of first-quar­ter spend­ing by the fed­eral Bu­reau of Eco­nomic Anal­y­sis. That should quell fears of a mas­sive first-quar­ter in­crease in health­care spend­ing thanks to Oba­macare.

But a sep­a­rate re­port by Price water­house Coop­ers’ Health Re­search In­sti­tute pre­dicted that health­care spend­ing will jump by 6.8% next year, spurred by the re­cov­er­ing econ­omy and in­creased in­surance cov­er­age.

The ini­tial BEA re­port based on firstquar­ter spend­ing pointed to a big jump with its es­ti­mate of a 9.9% an­nual in­crease. But the third and fi­nal re­vi­sion of first-quar­ter spend­ing, re­leased last week, put health spend­ing on pace to de­cline 1.4% for the year, a ma­jor con­trib­u­tor to a 2.9% de­cline in U.S. eco­nomic ac­tiv­ity in the first quar­ter.

This fi­nal re­vi­sion for the first quar­ter “il­lus­trates the risks of try­ing to make in­fer­ences about long-term health­care cost growth from noisy quar­terly data,” said Jonathan Skin­ner, a Dartmouth Univer­sity health­care econ­o­mist.

“So much for the BEA’s ini­tial view that the start of Oba­macare trig­gered a surge in spend­ing on health­care,” wrote Ian Shepherdson, chief econ­o­mist for con­sul­tancy Pan­theon Macro­eco­nomics.

The Oba­macare bump in spend­ing will take time to ma­te­ri­al­ize, some ex­perts say. Sec­ond-quar­ter data may in­clude spend­ing for trips to the doc­tor or hos­pi­tal by those newly in­sured in March, said Charles Roehrig, an econ­o­mist and direc­tor of the Al­tarum In­sti­tute’s Cen­ter for Sus­tain­able Health Spend­ing. “Once you gain cov­er­age, it takes a while to es­tab­lish your­self with a physician.”

More time and data are needed to grasp how health spend­ing will change with Af­ford­able Care Act en­roll­ment and the econ­omy, econ­o­mists said. Skin­ner said he con­tin­ues to project growth of 1.2% above GDP gains. “It’s too soon to tell,” he said.

Harsh win­ter weather and de­layed health in­surance en­roll­ment likely con­trib­uted to a de­cel­er­a­tion in health spend­ing dur­ing the first quar­ter com- pared with the fi­nal months of 2013, Roehrig said.

Mean­while, Price wa­ter house Coop­ers’ pro­jected spike in health­care spend­ing for 2015 is more than dou­ble the rate of in­fla­tion in re­cent years. But the re­port con­cluded that emerg­ing trends in cov­er­age and de­liv­ery sys­tems are tamp­ing down costs. For ex­am­ple, em­ploy­ers con­tinue to shift to­ward high-de­ductible plans that re­quire work­ers to pay more out of pocket.

Price wa­ter house Coop­ers’ re­port was based on a sur­vey of more than 1,000 em­ploy­ers cov­er­ing 93 mil­lion peo­ple.

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