Amidst the dark skies of the Healthcare.gov launch, some daylight may finally be emerging with respect to one of the critical goals of the Affordable Care Act—bending the cost curve of America’s expensive healthcare system.
According to a New York Times report out Tuesday, the Congressional Budget Office has quietly removed hundreds of billions of dollars from the projected costs of Obamacare, primarily the result of an anticipated decrease in the federal government’s contribution to the Medicaid expansion program along with the projected cost of the subsidy payments to those buying private insurance policies on the healthcare exchanges.
Why the good news?
The more favorable projections are the direct result of the slowing trend in the growth of healthcare spending over the past five years leading to a slowdown in rising costs. While, ten years ago, per-capita spending on healthcare had been growing by an average annual rate of 5 percent, that number was dramatically cut to 1.8 percent during the 2007-2010 period and reduced even further to 1.3 percent in the years following 2010.
Do we have Obamacare to thank for this highly successful “bending” of the cost curve? Naturally, the answer depends upon who you ask as there simply is no definitive way of knowing—yet.
While most economist believe that the lion’s share of the reduction is due to the sluggish economy—making Americans far more careful when it comes to making decisions regarding when or if to spend money on medical care—others believe that some of the plans built into the ACA designed to get people to spend less may actually be working.
Among Obamacare inventions that do appear to be paying off in lower healthcare costs is the government’s refusal to pay hospitals more when patients are re-admitted within 30 days of their initial discharge. Additionally, new plan designs engineered to reward providers for quality of care rather than for quantity of care may well be paying off in terms of lowering the overall cost of care.
According to the Kaiser Family Foundation—widely regarded as an honest, non-partisan broker when it comes to healthcare issues and analysis—the declining increases in the cost of healthcare is 75 percent the result of economic factors and 25 percent a benefit of the cost cutting measures in the ACA that do, in fact, appear to be working.
Of course, the big question is whether or not these cost lowering provisions of Obamacare will continue to do the job once the economy regains its more typical trajectory. There are reasons to be hopeful that healthcare spending can be held down once the economy kicks into higher gear.
For starters, while many Americans shopping for new health insurance policies may be decrying the higher deductibles they are discovering in the new offerings, higher deductibles should have a meaningful impact on the decisions people make when determining whether or not a visit to the doctor or agreeing to a given procedure is really necessary. While a $250 deductible will likely not cause a patient to ask how much a suggested CT Scan is going to cost, a $3,000-$5,000 deductible is far more likely to cause the patient to ask a few more questions and make more focused decisions when payment for the test is coming out-of-pocket.
Not surprisingly, there are no shortage of economists and pundits who believe that the ACA will prove inadequate to the task of controlling costs once the economy is in better shape. Others are more hopeful, believing that the slowdown in costs are very much a result of hospitals and insurance companies understanding that something had to change given the unsustainable trends in rising costs. As a result of a desire to derail out-of-control costs before the costs derailed them, insurers and hospitals became involved in substantial systemic revisions designed to lower healthcare spending even before the government required them to do so.
Discussing whether the current decreases can last when previous periods of cost-curve bending did not, Annie Lowrey writes in her New York Times piece—
“This time may be more durable. Insurance and hospital executives in Massachusetts, Illinois and California, among other places where reforms have gone the furthest, report a consensus that spending growth had become unsustainable, and that expectations that Washington would force changes to the system spurred them to make changes themselves.”
If this is true—and I believe the evidence reveals that it is—these self-imposed changes, in tandem with the changes brought about by elements of Obamacare that don’t receive nearly as much attention as the more hot button issues, may prove to provide lasting changes to the system; changes that will point our cost trajectory in the right direction.
While this reality may prove unsatisfying to the media, politicians and those in the public who are so emotionally committed to the failure and ultimate death of Obamacare—whether for political purposes or only so that the opponents can experience the satisfaction of having been right—anyone interested in realistic measurement of this dramatic change in our system better settle in for the long run.
article by Rick Ungar via forbes.com