Wednesday, April 23, 2014

Fwd: qotd: Health spending expected to accelerate again

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Subject: qotd: Health spending expected to accelerate again
Date: Wed, 23 Apr 2014 08:38:52 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

The New York Times
April 22, 2014
Acceleration Is Forecast for Spending on Health
By Eduardo Porter

The Affordable Care Act may well be on track to meeting its primary goal
of providing coverage for most uninsured Americans and protecting
everyone against the risk of losing their insurance. But for all its
innovative proposals to flush waste out of the system, reining in health
care spending still appears well beyond the grasp of Obamacare.

"We have been consistently bending the cost curve over the last 20
years, but the kinds of things that we do don't tend to be permanent,"
said Charles Roehrig, who runs the Center for Sustainable Health
Spending at the Altarum Institute, a nonprofit based in Washington. "It
will take a lot of work just to stay on the same curve we have been on
for a while."

The evolution of the American medical-industrial complex has been driven
by two critical dynamics. The first is the development of new
technologies. The second is our willingness to pay for them.

Most health care economists agree that the Affordable Care Act, along
with other forces, will help reduce waste, pushing the industry to drop
the "fee for service" model that encourages doctors and hospitals to
spend more whether it is useful or not.

Last November, President Obama's Council of Economic Advisers issued a
hopeful analysis, which posited that structural changes flowing from the
act were helping push the growth in health care spending to its slowest
on record.

David Cutler of Harvard points to studies that suggest that
straightforward changes, such as improving the dismal management of
American hospitals, could cut health care costs by 25 to 50 percent.
"Getting better is not rocket science," he said.

But that optimism might be premature. Mr. Roehrig argues that the
decade-long slowdown in spending growth reflects a response to the two
recessions that provided the economic bookends to the first decade of
the new century; not a fundamental shift in the way the system operates.

During that period, employers pushed workers to take insurance with
higher out-of-pocket payments, which discouraged use. Medicaid in
financially troubled states has cut provider fees and limited access to
high-cost services. And, of course, many unemployed workers who lost
their company health insurance cut back on visits to the doctor.

These effects, Mr. Roehrig noted, have by now mostly petered out. As the
economy recovers, spending growth will resume its climb, reinforced even
more by the understandable demands from the eight million newly insured
Americans under the health law for services they couldn't afford
previously. He forecasts that health spending will grow substantially
faster than G.D.P. in the near future, but expects the gap to shrink
gradually to below one percentage point over time. In the long run, he
projects that health care spending could consume 30 percent of G.D.P.

Mark McClellan, a former administrator for the Centers on Medicare and
Medicaid Services under George W. Bush, and Alice Rivlin, a former vice
chairwoman of the Federal Reserve, point out that innovations that
improve health or reduce the cost of medical services may also increase

"It would be a mistake to assume that slow growth in health care
spending will continue," they wrote, "or that spending reflects
high-value care and therefore, health care delivery reform is no longer
an urgent priority."

Over the last 40 years or so, health care spending has been growing 2.4
percentage points faster than the economy, on average.

But that slowdown still isn't good enough. By 2032, health care will
consume almost a quarter of the nation's economic production, taking an
even bigger bite from workers' wages and either forcing taxes up to pay
the government's share, adding more to the national debt, or squeezing
other important public services.

So, if Americans really want to win the health care spending war, it may
take more than reform. It may still take a revolution.


Comment by Don McCanne

There has been much speculation about the causes of the recent slowdown
in health care spending, but, more importantly, about whether the more
recent uptick indicates a return to greater health care inflation and,
even more importantly, whether new innovations - especially those in the
Affordable Care Act (ACA) will be capable of slowing the increases in

Nobody can reliably predict the future. But the policy community can
take a careful look at the facts we do have on hand and make decisions
that would improve the odds of achieving a goal of more efficient
spending in health care.

Almost every article supportive of the cost containment measures in ACA
mentions vague concepts such as no longer paying for volume in health
care services but paying for quality instead. If they make an attempt to
explain how we might do that, they often invoke accountable care
organizations, which, at best, seem to be more loosely designed managed
care organizations that so far have failed the tests of greater
efficiency and higher quality, other than a few reports of positive but
negligible impacts that could never "bend the cost curve" nor truly
improve quality.

What we do know is that our administrative waste is profound and that
the excesses are readily recoverable - a crucial point that was omitted
from this and most other current articles on the causes of our high
health care costs. A single payer system would have a major impact on
reducing waste in health care spending. We also know that health care
prices in the United States are outrageous, and public administration
through a single payer system would bring prices down to a level that
pays legitimate costs plus fair margins.

We do know that there are excesses in high tech medicine. Again, a
single payer system could use objective data, such as comparative
effectiveness studies, to make decisions on eliminating payment for
useless or harmful services. Also, capital planning can reduce excess
capacity which would ameliorate its supply side-driven overutilization.
The savings may be offset by improving access to beneficial services for
underserved populations, but that spending would increase the overall
quality of care provided by the health care delivery system - quality
meaning getting the right care to the right people at the right time.

So, as far as predicting health care cost containment in the future we
know that a single payer system would have a dramatic effect. But we can
also predict quite reliably that dinking around with the meager
wish-list policies of ACA will only distract us from moving forward with
single payer policies that would really work.

Eduardo Porter writes that it may take a revolution to win the health
care spending war. The battle would be between the American people and
the economic elite that drive policy (Gilens and Page) and concentrate
wealth (Piketty). Obviously non-violent civil action through the
democratic process would be vastly preferable to a violent coup, but
people are going to have to get off their duffs and initiate citizen action.

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