On “the Myth of Runaway Health Spending”: Is the Crisis Really Ending?

Center for Sustainable Health Spending colleagues George Miller, Ph.D. and Paul Hughes-Cromwick have the following thoughts.

In the February 17 issue of The Wall Street Journal, J.D. Kleinke discusses the decline in the growth rate in national health expenditures from 2002 through 2010--the most recent year for which official government estimates are available. Analysis at our Center for Sustainable Health Spending (February Spending Brief) reveals that this decline is continuing: While health spending growth in 2011 (4.5 percent) was higher than the record low rates in the previous two years, month-by-month estimates show an increase in spending growth early in the year followed by a gradual decline late in the year to levels similar to the official 2010 growth rate of 3.9 percent.

Kleinke hypothesizes a number of contributors to this slowing of growth that emphasize market drivers: “… cumulative improvements in medical care by insurers, and … marketplace disciplines on the demand for medical care.”  In his view, “Consumers are finally getting more involved in managing and paying for their own care.” 

To these explanations we would add:

Source: Urban Institute, 2011. Based on data from the 2001-2011 ASEC Supplement to the Current Population Surveys

While we agree with Klienke that “…there is no way to determine how much money has been saved” by either the factors he lists or those we have added, we believe that it is both necessary and possible to develop an understanding of which of them are contributing significantly to the decline in spending growth and why.  Without such understanding, we won’t know which initiatives to emphasize further in order to control costs without sacrificing access to, and quality of, care.

If the decline in spending growth is a result of smarter spending by consumers (with no negative health consequences), we should further emphasize the role of consumers with well-structured consumer-driven health care insurance products, expanded attention to care price transparency and educational tools. If, instead, it is caused by individuals forgoing needed care because they lack insurance or because they cannot afford the out-of-pocket expenses associated with high-deductible policies, we should seek to rectify these problems while pursuing initiatives that control spending without sacrificing access. 

Many organizations, including our center, are engaged in efforts to better understand these issues, and some of the provisions of the Patient Protection and Affordable Care Act provide both experimental initiatives and the analytical infrastructure to help add to this understanding. These include accountable care organizations, demonstrations involving bundled payments, patient-centered medical homes, and value-based Medicare reimbursements that reward high quality and penalize events such as unnecessary hospital readmissions.

“Moderation in health care spending is good news,” as Kleinke notes, but only if it can be sustained and does not come at the expense of access and quality. Further research is needed to determine if these conditions have held in the past and to help ensure that they will hold in the future.

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