3 Signs That Obamacare Is Slowing Health Care Spending by Niki2

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3 Signs That Obamacare Is Slowing Health Care Spending

POSTED BY: NIKI2
UPDATED: Wednesday, November 20, 2013 17:10
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Wednesday, November 20, 2013 5:10 PM

Gettin' old, but still a hippie at heart...

The three years since the Affordable Care Act passed -- 2011, 2012 and 2013 -- have seen the slowest growth in health care spending since 1965, when the statistic began being consistently tracked. Health care spending had grown by an average annual rate of 3.9 percent between 2000 and 2007, before dipping to 1.8 percent between 2007 and 2010. According to the new report, the average annual rate of growth from 2011 to 2013 dropped still further, to 1.3 percent.

1. Evidence that some of the drop in the growth rate of health care spending is structural, as opposed to cyclical

The recession ended in 2009, but health care spending has continued to slow its annual growth. So the persistence of the trend is one marker.

In addition, according to the report, health care price inflation is also slowing down. (The price of individual health care goods and services is different from overall spending on health care.) The personal consumer expenditure price indices are down to a 1.8 percent annual average growth rate since Obamacare passed -- down from a 2.8 percent average annualized rate of growth from 2007 to 2010. Health care prices wouldn't be affected by the struggling economy the way outright spending (which can be held down by people seeking to spend less on health care) would be.

The other marker is Medicare's average annual spending growth, which tends to be more isolated from the broader economy because it's government-funded, Furman said. Medicare average spending growth has been flat -- literally 0 percent -- since 2010.

2. Obamacare has already done tangible things to slow health care cost growth.

Obamacare included real reforms that cut spending. The Congressional Budget Office estimated that the federal government would save $17 billion in fiscal year 2013 through cuts to Medicare Advantage payments to private insurers and adjustment in payments to providers. Spread over the three years since the law was passed, that accounts for an average annual 0.2 percentage point reduction in health care spending growth over that time, according to the White House.

Other reforms are likely to have an effect on spending growth. The federal government has started penalizing hospitals for high readmission rates. The law created groups known as accountable care organizations, comprised of health care providers who will share savings (or lose money) based on whether they deliver quality care.

3. Historical precedent says that changes in Medicare spending will lead to changes in private insurance spending.

According to research, when Medicare cuts provider payments, the private insurance industry on average cuts its own payments by 77 percent of that amount. Another study found that every dollar of Medicare savings resulted in 55 cents in private insurance savings.

So if you take the 0.2 percentage point reduction through the Medicare payment cuts and apply it to the private sector, you get a 0.5 percentage point reduction in overall health care price inflation that can be linked to Obamacare -- a significant contribution to the decline in price inflation cited above and therefore the total spending slowdown. ( http://www.scribd.com/doc/185795363/White-House-Report-on-Health-Care-
Spending)

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