Cost growth pro­jected to climb; can ACA ini­tia­tives slow it down?

Modern Healthcare - - NEWS - By Melanie Evans

The U.S. econ­omy’s lack­lus­ter re­cov­ery from the Great Re­ces­sion eroded wages and left mil­lions chron­i­cally un­em­ployed. But it also gave the na­tion a break from rapidly ris­ing health­care spend­ing. Now, though, med­i­cal spend­ing is likely to re­sume its growth, fu­eled by the im­prov­ing econ­omy, Oba­macare’s cov­er­age ex­pan­sion, an ag­ing pop­u­la­tion and the high cost of new spe­cialty drugs, ac­cord­ing to last week’s re­port from fed­eral ac­tu­ar­ies.

Many pol­i­cy­mak­ers and health­care providers say it’s a good thing to spend more to pro­vide health cov­er­age for a larger per­cent­age of the Amer­i­can pop­u­la­tion. The big ques­tion, how­ever, is whether cost-con­trol ef­forts pro­pelled by fed­eral pol­icy and mar­ket dy­nam­ics will be able to counter those fac­tors driv­ing up spend­ing. Health­care ex­perts re­main di­vided in their views.

To­tal health spend­ing was pro­jected to grow 3.6% in 2013, with ex­pen­di­tures stay­ing at 17.2% of gross do­mes­tic prod­uct for the sec­ond straight year, ac­cord­ing to a re­port from the CMS Of­fice of the Ac­tu­ary pub­lished on­line last week by the jour­nal Health Af­fairs. If the pro­jec­tion is con­firmed this year, it would mark the fifth straight year of growth be­low 4% and the sec­ond time in three years na­tional health­spend­ing growth dipped to a his­toric low after 18 years of 7.2% av­er­age an­nual growth.

But the ac­tu­ar­ies pro­jected that 2014 spend­ing would grow 5.6% as the Pa­tient Pro­tec­tion and Af­ford­able Care Act ex­tends cov­er­age to 9 mil­lion unin­sured Americans, and that ex­pen­di­tures would con­tinue to grow 6% a year from 2015 to 2023. That’s 1.1 per­cent­age points faster than the pro­jected GDP growth dur­ing that pe­riod.

“The pe­riod in which health­care has ac­counted for a sta­ble share of eco­nomic out­put is pro­jected to end in 2014, pri­mar­ily be­cause of the cov­er­age ex­pan­sions of the ACA,” the ac­tu­ar­ies wrote. “It is an­tic­i­pated that by 2017, once the mostly one-time tran­si­tional ef­fects of ex­panded cov­er­age have fully tran­spired, the health share of GDP will in­crease, al­beit at a slower rate than its his­tor­i­cal av­er­age, as an im­prov­ing econ­omy and the ag­ing of the baby boom gen­er­a­tion lead to faster health spend­ing growth.”

The news isn’t bleak. The growth pro­jected by the ac­tu­ar­ies is sig­nif­i­cantly slower than the 7.2% av­er­age an­nual spend­ing in­crease be­tween 1990 and 2008, when health­care spend­ing out­paced GDP by 2 per­cent­age points. Still, at the pro­jected growth rate, the health share of GDP is ex­pected to rise from 17.2% in 2012 to 19.3% in 2023, when spend­ing will to­tal $5.2 tril­lion com­pared with $2.8 tril­lion in 2012.

The “more fa­vor­able eco­nomic con­di­tions” in 2014 and beyond “are ex­pected to re­sult in greater de­mand for health­care goods and ser­vices, in­creases in health cov­er­age and faster rates of health­spend­ing growth, par­tic­u­larly for pri­vate health in­surance,” ac­cord­ing to the ac­tu­ar­ies’ re­port. “How­ever, th­ese rates of in­crease are ex­pected to be damp­ened some­what by the slower growth in Medi­care pay­ment rates man-

dated by the ACA and the on­go­ing trend to­ward higher cost­shar­ing re­quire­ments for the pri­vately in­sured.”

The new pro­jec­tions show­ing a con­tin­ued health­care spend­ing slow­down for 2013 of­fer tan­ta­liz­ing clues but no cer­tainty for pol­i­cy­mak­ers and health­care stake­hold­ers who have puz­zled and wran­gled over the rel­a­tively mod­er­ate growth that started in 2009. “We know what’s go­ing on,” said Jonathan Ober­lan­der, a health pol­icy pro­fes­sor at the Univer­sity of North Carolina at Chapel Hill. “We don’t ex­actly know why.”

The ques­tion of why mat­ters a lot to fed­eral bud­get writ­ers, pri­vate busi­nesses and house­holds, be­cause higher health costs squeeze the rest of the econ­omy, driv­ing down in­vest­ment, wages and con­sumer spend­ing. If the strug­gling post-re­ces­sion econ­omy was the pri­mary rea­son, health spend­ing is likely to ac­cel­er­ate again with re­cov­ery.

The CMS ac­tu­ar­ies said last week that the Great Re­ces­sion and the slow eco­nomic re­cov­ery were largely re­spon­si­ble for the health-cost slow­down and that ev­i­dence of the im­pact of the health­care re­form law’s cost-con­trol ini­tia­tives is scant. “We don’t have any ex­plicit im­pact for any of th­ese in­no­va­tions at the cur­rent time,” CMS economist Sean Keehan said. “There’s just not enough ev­i­dence.”

That did not stop the Obama ad­min­is­tra­tion from claim­ing the mod­er­ate 2013 health-spend­ing in­crease as a vic­tory for Oba­macare. “While the ac­tu­ar­ies project that the re­cent slow­down will largely dis­si­pate as eco­nomic re­cov­ery con­tin­ues, the bal­ance of ev­i­dence im­plies that much of the re­cent health­care-spend­ing slow­down has been driven by struc­tural changes, which sug­gests that a sig­nif­i­cant por­tion may per­sist,” the White House said on its blog.

Jonathan Gru­ber, an economist at the Mas­sachusetts In­sti­tute of Tech­nol­ogy who helped draft the Af­ford­able Care Act and the Mas­sachusetts health­care re­form laws, said the pro­longed du­ra­tion of the health-cost slow­down sug­gests that more than the econ­omy was re­spon­si­ble. Un­like the cost slow­down that oc­curred with man­aged care in the 1990s, ef­forts to con­tain spend­ing are more wide­spread and sys­tem­atic. Health plans with high de­ductibles ex­pose con­sumers to a big­ger share of med­i­cal bills, and an en­tire in­dus­try has emerged to help em­ploy­ers and con­sumers com­par­i­son-shop for lower prices and bet­ter qual­ity of care. Mean­while, he noted, in­sur­ers are com­pet­ing more ag­gres­sively on pre­mi­ums on the Oba­macare ex­changes. In ad­di­tion, al­ter­na­tive pay­ment and de­liv­ery mod­els such as ac­count­able care are re­ward­ing ef­fi­ciency and lower costs.

But Joseph An­tos, an economist with the con­ser­va­tive Amer­i­can En­ter­prise In­sti­tute, said it’s mainly the Great Re­ces­sion and the slow re­cov­ery that get the credit for damp­en­ing health­care spend­ing growth. House­holds re­sponded to the eco­nomic down­turn by spend­ing less, in­clud­ing cut­ting back trips to the doc­tor and pharmacy and de­lay­ing elec­tive pro­ce­dures.

The CMS ac­tu­ar­ies’ pro­jec­tions show growth will swing sharply up­ward in 2014 with mil­lions of newly in­sured un­der the Af­ford­able Care Act. As the econ­omy re­cov­ers and baby boomers age dur­ing the next decade, growth will ex­ceed 6% a year, the ac­tu­ar­ies pre­dicted. That ac­cel­er­a­tion, how­ever, is not as fast as in the two decades be­fore the re­ces­sion, when health­care spend­ing growth out­paced the econ­omy by 2 per­cent­age points. Pro­jec­tions through 2023 show an an­nual 1.1 per­cent­age point gap, on av­er­age, be­tween health spend­ing and eco­nomic growth.

All this oc­curs as the num­ber of unin­sured Americans is pro­jected to fall to 23 mil­lion by 2023 from 45 mil­lion peo­ple in 2012, the ac­tu­ar­ies said. Nine mil­lion unin­sured Americans gained in­surance in 2014, while another 8 mil­lion will get cov­ered in 2015.

Ober­lan­der stressed that greater ac­cess to health­care through in­surance ex­pan­sion was one of the re­form law’s chief goals, and higher spend­ing is worth it. “I think a lot of us would say it’s a pretty good trade-off,” he said.

The ac­tu­ar­ies re­ported that in 2013, be­fore in­surance ex­pan­sion, hos­pi­tal spend­ing growth cooled as Medi­care paid less un­der fed­eral bud­get se­ques­tra­tion. Fewer hos­pi­tal­iza­tions also con­trib­uted to the slow­down. But de­mand is pro­jected to in­crease as ag­ing baby boomers grow in­creas­ingly frail and the econ­omy im­proves, the ac­tu­ar­ies said.

Doc­tors also will see in­creased de­mand be­cause of the Af­ford­able Care Act’s cov­er­age ex­pan­sion. But lower pay­ment rates will hold spend­ing in check, the ac­tu­ar­ies said.

On the other hand, spend­ing growth will be lower than it was in the 1990s and 2000s be­cause of lin­ger­ing ef­fects of the re­ces­sion, more con­sumers with high-de­ductible health plans and the lack of high-priced block­buster phar­ma­ceu­ti­cals that were preva­lent in that ear­lier pe­riod. Block­buster drugs lost their patents in re­cent years and generic use in­creased, which helped to hold drug spend­ing to 0.4% growth in 2012 and a pro­jected 3.3% rise in 2013. Drug spend­ing can drag down over­all health spend­ing “if you go from a pe­riod where block­busters are ev­ery­where to a pe­riod where block­busters are nowhere,” said Paul Hugh­esCromwick, an economist with the Al­tarum In­sti­tute.

Still, drug spend­ing is pro­jected to ac­cel­er­ate as more Americans gain in­surance cov­er­age and also be­cause of costly new hep­ati­tis C treat­ments. The drugs So­valdi and Olyio are pro­jected to cost Medi­care up to $5.8 bil­lion in 2015, ac­cord­ing to ac­count­ing firm Mil­li­man. So­valdi’s price tag is $85,000 for a full course of treat­ment.

The po­ten­tial in­tro­duc­tion of other high-priced, high­de­mand drugs in the next decade un­der­scores how un­cer­tain health spend­ing pro­jec­tions can be, An­tos said.

The ac­tu­ar­ies would not pre­dict how Af­ford­able Care Ac­tre­lated pol­icy changes such as bun­dled pay­ment or emerg­ing mar­ket forces would af­fect cost growth. Mark Pauly, a health pol­icy pro­fes­sor at the Univer­sity of Penn­syl­va­nia, said the pro­jec­tions seem to say, “‘We think things are go­ing to be some­what dif­fer­ent, but not all that dif­fer­ent.’ ”

Even if U.S. health­care spend­ing grows more slowly than in pre­vi­ous decades, that doesn’t change the fact that this coun­try spends far more than any other ad­vanced coun­try on health­care, and lots of hard work re­mains to be done to get more ef­fi­cient, Ober­lan­der said. “We’ve got a long, long way to go.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.