Universal coverage and cost control are NOT mutually exclusive

Apologies for the month-and-a-half hiatus in blog posts; finals, graduation, studying for MCATs, and a week-long climbing trip to West Virginia have made it difficult to keep updated.

A symbol for the seemingly insurmountable problem of health care costs?

But now that I have a solid week and a half at home before the next climbing trip, I think it’s a good time to share some thoughts on health care costs and the ACA, especially given the Supreme Court decision that could be out any day now.

A few weeks ago I read a Health Affairs article which argued that affordability, not cost growth, is the real policy challenge. The two primary cost drivers in health care historically, pharmaceuticals and imaging, have slowed dramatically and are likely to stay that way, and hospital spending appears flat. The larger problem, the author argued, is the fact that 50 million Americans lack coverage, another 35-40 million are “underinsured” (have insurance but still can’t afford out-of-pocket payments), and 53 million are on Medicaid—implying that “almost half of the country cannot afford to use the health system’s product without massive public subsidy”. The author attributed this problem partly to excessive pricing by providers in specific geographic locales, and called for patients and payers to exert more pressure in lowering prices.

“…the cost curve is well and truly bent,” the author concluded.

Au contraire. New estimates were released by the Office of the Actuary at the Center for Medicare and Medicaid Services two days ago. Here are just a few of the indicators that the health care cost curve is NOT “well and truly bent”:

  • Growth in spending on physician and clinical services, which declined to around 2.7% due to the economic recession, is expected to rebound to 8.5% by 2014 as the 22 million newly insured (many of whom are young and relatively healthy) go to their primary care physicians and outpatient physicians’ offices. This is assuming that the 30.9% cut in Medicare physician payments takes effect in 2013, which we all know has been avoided since 1997 and will be legislatively kicked down the road again.
  • Growth in spending on pharmaceuticals, which is expected to drop to less than 3% from the impending expiration of several brand-name drugs in 2013, will rebound to 8.8% in 2014 and remain high beyond that as the baby boomer generation ages and new biologics enter the market.
  • Even hospital services, which are facing the short end of the stick of reform (Medicare payment cuts to hospitals and new payment models that discourage hospitalization), will see their spending growth jump to 6.7% in 2014 and remain high as more baby boomers enter Medicare and economic recovery increases everyone’s ability to pay.

I first saw this article in a Wall Street Journal article, accompanied by this graph.

Unsurprisingly, as the WSJ enthusiastically points out, much of the jump in spending growth in 2014 can be attributed to the ACA. The obvious solution, it appears, would be REPEAL. Repeal the law, health spending goes down, cost curve bent.

A few points:

  1. As can be seen from the graph, the jump in spending growth in 2014 is only a temporary one. In fact, by 2017-2018, the ACA is estimated to slow spending growth relative to a situation in which it is appealed, due to measures such as the excise tax on high-cost insurance plans (so-called “Cadillac plans”), which will relieve some of the over-consumption driven by overly generous plans.
  2. Regardless of whether or not the ACA is repealed, we will still need to figure out how to consistently keep the growth in health care costs low. In the long run, doing so is much more important than a one-time reduction in level of health spending (or a one-year reduction in health spending growth, as repeal of the ACA would do). Here’s why: (Unfortunately I am not sure of the source of this graph, it was presented in a course I took at the University of Pennsylvania by Dr. Ezekiel Emmanuel, and really illustrates this point well.)
  3. Finally, this issue touches upon a point of contention that permeates our national discourse on health reform today: many of us appear to have come to the conclusion that expanded insurance coverage and cost control are mutually exclusive—in other words, we can’t have our cake and eat it too. We either ensure access to care for the uninsured and underinsured and pay for it from our wallets (the Democratic view), or adopt a mantra of personal responsibility and control spiraling health care costs (the Republican view). The fact that the projected growth in health expenditures converges by 2015 with or without the ACA suggests that we are facing two separate problems.

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