The ACP Advocate Blog

by Bob Doherty

Friday, January 13, 2012

Historic declines in health spending growth? Healthier people? Who knew?

Blogging about health care can be a downer. Exploding health care costs, too many uninsured, Medicare pay cuts, a dysfunctional political culture . . . and so it goes. But I came across a couple of new reports that suggest that there may be some rays of sunshine among all of the clouds.

For one thing, did you know that health care cost increases have hit a 50-year low? That’s right: health care costs in 2009 and 2010, the most recent years for which data are available, had the smallest increase since the days when Elvis Presley was topping the charts. According to the government’s most recent analysis:

“In 2010 extraordinarily slow growth in the use and intensity of services led to slower growth in spending for personal health care. The rates of growth in overall US gross domestic product (GDP) and in health spending began to converge in 2010. As a result, the health spending share of GDP stabilized at 17.9 percent. . . Continued slow growth in private health insurance and out-of-pocket spending (which grew just 2.4 percent and 1.8 percent, respectively) and decelerations in Medicare and Medicaid spending growth (which slowed to 5.0 percent and 7.2 percent, respectively) contributed to overall low growth in 2010.”

Oh, and another piece of good news in the report. You know the allegation that “ObamaCare” has caused a big spike in health care spending? Not so . . . the Affordable Care Act added a statistically insignificant amount to the nation’s health care bill, even as millions of seniors got discounts on their brand name drugs and no-cost preventive services, 2.5 million young adults were able to keep their coverage through their parents’ plans, and children with pre-existing conditions could no longer be dropped from coverage.

It is true that the last two years’ decline in health spending growth might not be entirely good news, since the researchers suggest that some of it may be because people put off needed care during the recession. Some might be luck, like the fact that we had a relatively uneventful flu season.

But another analysis found that annual health care cost increases have been slowing for the past eight years, so neither bad luck (the recession) nor good luck (not a lot of flu) can explain it all.

This doesn’t mean we are out of the woods on health care spending: even though it is increasing at a historically low rate, it is still growing faster than the overall economy. The Congressional Budget Office (CBO) still projects that “spending on the major mandatory health care programs alone would grow from less than 6 percent of GDP today to about 9 percent in 2035 and would continue to increase thereafter. Altogether, the aging of the population and the rising cost of health care would cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 15 percent of GDP twenty-five years from now. (By comparison, spending on all of the federal government's programs and activities, excluding interest payments on debt, has averaged about 18.5 percent of GDP over the past 40 years.)”

Still, the fact that health care spending growth has been slowing for almost a decade now is good news. Maybe we are starting to figure out a way to deliver care more effectively and efficiently.

People also are healthier, according to another new government report. In 2010, life expectancy increased, the death rates fell for all five leading causes of death, and the death rate from homicide was as low as it’s been in half a century, according to the National Center for Health Statistics.

Policymakers frankly aren’t sure why homicides and health spending growth have dropped so much. As Buffalo Springfield sang in the 1960s, “There's something happening here, What it is ain't exactly clear.” But still, it is good to reflect that despite all of the challenges facing American health care, it isn’t all gloom and doom.

Today’s question: Why do you think health care spending growth has reached historic lows, even as the population is healthier?

7 Comments :

Blogger Steve Lucas said...

I feel there are a number of reasons we are seeing medical cost flattening, first due to age and position doctors have captured all of the available patients covered by a traditional insurance plan.

Following on, young people entering the work force are being offered high deductable plans and are opting not to seek medical care at the same rate as their parents.

The internet, for better or worse, and there is a lot of worse, has made information available to a larger group of people who now question certain medical testing and treatments.

Sadly, young people leaving graduate schools of all types are saddled with an impossible debt load. Add in the cost of starting a medical practice and many young doctors are electing to go to work in a corporate setting at a fixed salary. This has allowed cost to be contained, but has also driven down compensation for the stand alone practice.

No matter what our personal or professional beliefs or desires medicine has changed to meet the financial realities of our time. These changes have placed pressure on the stand alone practice and may in a short time make it financially impossible to operate.

While I see this as a loss to society, others see this as an unnecessary expense. The corporate structure of a medical practice carries with it the unspoken desire to maximize profits. Private practices, pressed by declining reimbursement, have often chosen to emulate this model. The result, again sadly, is patients do not see value in the stand alone practice.

NNT, generic, non-invasive and a whole list of other words have entered the patients and insurance companies’ vocabulary. Can I get a CT scan with that MRI? No.

I do believe that the stand alone practice can produce lower cost and a more satisfying experience for both the doctor and patient. We do need to change doctor reimbursement to allow for more time and interaction with patients, but this should not be confused with a raise by maintaining the same practice model.

We are going to see great changes in the way medicine is practiced in this country. We will sadly loose some very good doctors, and may not like the results, but medicine is, and will continue to change.

Steve Lucas

January 13, 2012 at 1:25 PM  
Blogger Robert J. Sobel, M.D. said...

Pretty easy to understand the forces that are moving the margins. I have not parsed the latest population statistics, but I have always felt the big numbers on disease entities and modes of death give us a starting point to understand where the payoffs will be. The payoff on antihypertensive treatment continues to reap benefits, as millions of strokes and heart attacks are prevented. Most people can afford to have us solve that problem. Some refuse. It is unequivocally cost effective if I see them once a year and keep going some combination of diuretic/ACE-like agent/dihydropyridine/beta-blocker. The statins are doing "real" good. Yes, they have side effects and nuances. Yes, the billions saved on simvastatin the last five years are real. Yes, the dollars to be saved on atorvastatin are real.

The costs of more layers of corporate bureaucracy will not lead us anywhere good. I agree with Steve on his assessment of the trends. I will defend independent practice, even if it further moves to the margins.

If the ACP looks at our member's anecdotes and memoirs and studies, it will be a clear narrative. Defend us from the corporate onslaught by recognizing the legitimacy of concerns that the ACA over-reached and recognize that cost savings will not come from more ill-advised coercion on primary care (whether it be the financial or emotional sequelae of administrative burdens). The answer would be a succesfful push back on the bureaucratic tangles of managed care.

Regulate the price of the commodities. Continue to fine tune the hospital realities. Remember that money spent on primary care gets the most return. Remember that specialists and the technology gains have fueled many benefits, but don't pay too much of an advance. The ACP needs to step out and take the lead. Don't let the status quo of Hatch-Waxman and big corporate entities intimidate you.

High deductibles have moved us back toward a direct patient-physician payment. It has brought out many realities. Any out of pocket when a high monthly premium is already being paid is resented. A few can afford the financial coercion. It is temporarily lowering outlays, but it has a real risk of unfairly punishing those who could benefit most from consistent access to their physician and medications. I see this strategy as a more perverse form of coercion, i.e. at the patient level, than the third party hassles we must endure. It is neither necessary nor prudent to continue this proliferation.

In my dream world, local pharmacies (independent or chain) would fill whatever written prescription emerges from our patient-physician conference(with legitimate safety audits and database cross-checks). The market would be free of generic shortages and brand mark-ups. It would be a well-regulated, brand-only pharmacopeia, where prices are worked out by a regulated royalty system that emerges from Hatch-Waxman II. That would keep our stats going in the right direction.

January 14, 2012 at 12:38 PM  
Blogger ryanjo said...

Health expenses are growing slower, people are healthier, and economists don't understand why. Could the countinued increases in Medicare & Medicaid be explained by more Americans getting older and the economy forcing more people to rely on public assistance?

So let's go ahead and tinker with the formula that got us living longer & healthier. Let's force doctors into working for big corporations, create huge profits for unproductive parts of the health industry like insurers, and place overall responsibility for managing health care into bureaucratic government hands (historically the model of efficiency and prudence).

January 15, 2012 at 10:04 AM  
Blogger Ben said...

Could this all be due to decreased costs in the way we make drugs or it might really be just more healthier people. I would love to see the statistics on this.

Ben,
Texas Health Insurance

January 16, 2012 at 1:37 PM  
Blogger Steve Lucas said...

In reading the comments I was struck by a number of thoughts. ryanjo’s focus on profits is a truer measure than my focus on cost concerning corporate drivers. Corporate medicine, hospitals, hospital owned practices, drug/device companies, and insurance companies are focused on profit. Cost only enters the equation when they are trying to raise profits.

Dr. Sobel makes the excellent point that, medically speaking, the low hanging fruit has been plucked in the form of cardiac care and stroke prevention. He carries on with the concept that we need to look at population figures to find the next item on the list that will produce the biggest positive change in our population’s health.

This may be very different than what corporate medicine sees as providing the greatest profit.

I tend to look at the world from a cost stand point. Build a product and then determine if consumers will buy that product at a high enough price to provide a reasonable margin. When you go to a profit prospective filling a need no longer matters, only what can you sell at the greatest profit, needed or not.

Steve Lucas

January 16, 2012 at 3:39 PM  
Blogger michaeloco said...

It's difficult to say that there are healthier people nowadays, because you might have to think how healthy are they. Maybe some people just don't mind spending a lot on health insurances and would rather wait for the time they get an accident or get ill to realize it. private health insurance

May 3, 2012 at 10:22 PM  
Blogger Margaret said...

I think it's not because of the drugs they take. I think it's because of the internet, we can easily share good information on how to be healthy. We can easily know if it is bad for us or not. I think the reason behind this is people now know what is right and wrong when it comes to protecting their health. For example statins, without the internet we wouldn't know the side effects of it but with the use of the internet we can now know more information about it.

September 14, 2012 at 3:47 AM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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