Containing Cost of Health Care

Entitlement reform became the battle cry of one party not too long ago. I argued here how the real issue is the cost of health care. Social Security is easy, a few minor adjustments and it’s good for the foreseeable future. But look, untended consequence or not, this is great news.


CBO Projections

And from the CBO Report:

1. Health care spending is growing at the slowest rate on record:
According to the most recent projections,
real per capita health care spending has grown at an estimated average annual
rate of just 1.3 percent over the three years since 2010. This is the lowest
rate on record for any three-year period and less than one-third the long-term
historical average stretching back to 1965. This slower growth in spending is
reflected in Medicare, Medicaid, and private insurance.

2. Health care price inflation is at its lowest rate in 50 years: Measured using personal consumption expenditure price indices, inflation for health care goods and services is currently running at just 1 percent on a year-over-year basis, the lowest level since January 1962.  (Health care inflation measured using the medical CPI is lower than at any time since September 1972.)

3. The slowdown in health care cost growth is not due solely to the Great Recession; something has changed: The fact that the health cost slowdown has persisted so long even as the economy is recovering, the fact that it is reflected in health care prices – not just utilization or coverage, and the fact that it has also shown up in Medicare – which is more insulated from economic trends, all imply that the current slowdown is the result of more than just the recession and its aftermath.  Rather, the slowdown appears to reflect “structural” changes in the United States health care system, a conclusion consistent with a substantialbody of recentresearch.

4. The ACA is contributing to the recent slow growth in health care prices and spending and is improving quality of care: ACA provisions that reduce Medicare overpayments to private insurers and medical providers are contributing to the recent slow growth in health care prices and spending.  Other ACA reforms are reducing hospital readmission rates (see figure below) and increasing provider participation in payment models designed to promote efficient, high-quality care.

This is well worth watching and reading. Click the graph above for the Government release. Watch Krugman’s blog here. I’m sure he’ll have much more to say as the follow-on argument and further attempts to kill the ACA ensue.

2 thoughts on “Containing Cost of Health Care

  1. Jim P

    Yes, looks like good news. However, anecdotally, health insurance premiums seem to have skyrocketed (20-25% per year) the last couple of years. Any thoughts on that part of the equation?

    1. Steve Post author

      Jim, Good to see you here. I believe premium increases remain an issue. There is a lot of anecdotal evidence of rises but it is hard to sort out if they are real increases or: Increases as a result of the first rate not really providing insurance as some pre-ACA policies turned out to be. Ones that were cheap, but covered little, low caps, high co-pays, lots of exclusions, etc.; Increases which (for profit) insurance corporations dialed in before the law took effect knowing rules may prohibit it down the road. Both of these have been documented in individual (again anecdotal) cases. I don’t think we really know for sure…but am hopeful history will tell.

      – Also interesting Vermont has now chosen to take the Fed money from ACA implementation, Medicare, Medicaid expansion, and other state programs and create their own single payer program motto being “Everybody in, Nobody out” By the current discussion boards, there may be some traction there toward a national plan. If folks take a realistic look at how Medicaid has restrained costs relative to all the rest it is hard to deny.


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