Lower Healthcare Spending?

April 30, 2012
With the Affordable Care Act under scrutiny by the Supreme Court, I was interested in a piece of good news, reported by The New York Times over the weekend, that the growth in health spending has slowed substantially over the last few years. As noted in the article, healthcare spending grew by less than 4 percent nationally in 2009 and 2010, and its share of the gross domestic product held steady in 2010. It’s a trend that caught some experts by surprise, and there are a few theories about what’s behind the leveling off of health spending.

With the Affordable Care Act under scrutiny by the Supreme Court, I was interested in a piece of good news, reported by The New York Times over the weekend, that the growth in health spending has slowed substantially over the last few years. As noted in the article, healthcare spending grew by less than 4 percent nationally in 2009 and 2010, and its share of the gross domestic product held steady in 2010.

It’s a trend that caught some experts by surprise, and there are a few theories about what’s behind the leveling off of health spending. Some attribute it to the recession, and a reluctance of people to spend on non-urgent medical care because of lost medical coverage, worries about job security, and a greater percentage of high-deductible health plans. Others point to a lower number of expensive, novel drugs on the market and a more pressure to use generics.

But some health economists also point to a shift to accountable care as having a significant impact in lowering health spending. As noted by the Times, there has been a drop in spending on some hospitalized seniors, who are enrolled in Medicare and whose coverage should not be affected by the recession.  Also, some states that were not particularly hard hit by the recession showed significant lowering in healthcare spending, the article says. Both trends suggest that other factors are at work besides the economy.

Some experts are skeptical, saying that the slowing in healthcare spending may be temporary. But others say it could very well be an early indication that accountable care is beginning to pay off.

Time will tell who is right. In the meantime, the Centers for Medicare and Medicaid Services continues to press on.  This month CMS announced the first 27 ACOs that have entered into agreements with CMS under the Medicare Shared Service Program. Under the Shared Service Program, a provision of the Affordable Care Act, ACOs take responsibility for the quality of care furnished to people with Medicare in return for the opportunity to share in savings realized through improved care. The ACOs will serve 375,000 beneficiaries in 18 states. As of April 1, according to CMS, 1.1 million beneficiaries are receiving care from providers participating in Medicare Shared Services initiatives.

I think that’s noteworthy, and it leads me to believe that the slowing of healthcare spending is part of a long term, and hopeful, trend.

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