Respite from surging health care costs

WASHINGTON (AP) — Americans kept health care spending in check for three years in a row, the government reported Monday, an unusual respite that could linger if the economy stays soft or fade like a mirage if job growth comes roaring back.

The nation’s health care tab stood at $2.7 trillion in 2011, the latest year available, said nonpartisan number crunchers with the Department of Health and Human Services. That’s 17.9 percent of the economy, which averages out to $8,680 for every man, woman and child, far more than any other economically advanced country spends.

Still, it was the third straight year of historically low increases in the United States. The 3.9 percent increase meant that health care costs grew in line with the overall economy in 2011 instead of surging ahead as they normally have during a recovery. A health care bill that grows at about the same rate as the economy is affordable; one that surges ahead is not.
The respite means President Barack Obama and lawmakers in Congress have a window to ease in tighter cost controls this year, if they can manage to reach a broader agreement on taxes and spending. Health care spending is projected to spike up again in 2014, as Obama’s law covering the uninsured takes full effect, before settling down to a new normal.

"Economic, income and job growth in 2011 was modest and less than might normally be expected during an economic recovery,” said the report from the government’s National Health Expenditure Accounts Team. "This fact raises questions about whether the near future will hold the type of rebound in health care spending typically seen a few years after a downturn.”

The report noted signals in both directions.

Medicare spending grew faster in 2011, but Medicaid spending slowed down. Spending on hospital care slowed.
Spending on prescription drugs and doctors’ services accelerated, but spending for private health insurance grew modestly.
More people gained health insurance as a result of the health law’s requirement that young adults can stay on a parent’s plan until age 26. But employers increasingly steered workers and families into high-deductible health plans, which come with lower monthly premiums but require patients to pay a greater share of their bills out of their own pockets. That’s a disincentive to go to the doctor.

Although some insurers are currently seeking big premium increases for certain plans, it’s not clear that’s a widespread trend.

The slowdown in health care spending has been widely debated. Some experts see it as an echo-chamber effect of a weak economy. Others say cost controls by government and employers are starting to have an effect. Many believe costs need to be squeezed more.

"I think it’s a big opening,” said Ken Thorpe, a professor of health policy at Emory University in Atlanta, who served in the Clinton administration as a senior adviser. "If we have a debate on entitlement reform this year, we need to come up with ideas for pulling costs out of the system.”

Cutting payments to hospitals and doctors won’t solve the problem, said Thorpe. The challenge is to slow the spread of chronic illnesses such as diabetes while also finding ways to keep patients healthier and out of the hospital.

The numbers back up Thorpe’s observation. Health care spending is highly skewed toward the sickest people. Five percent of patients account for nearly half the total spending in any given year.

The report was published in the journal Health Affairs.