Estimates of U.S. health-care spending for the next five years have
been lowered by two federal agencies, and the Patient Protection and
Affordable Care Act is getting much of the credit.
U.S. health
spending in 2019 will be $4 trillion, the Centers for Medicare and
Medicaid Services said this week, or $500 billion less than the agency
projected in 2010 when President Barack Obama’s health-care overhaul
became law. That announcement followed by a week a report from the
Congressional Budget Office lowering its five-year cost estimates.
Obamacare
has been criticized by Republicans as costly and unsustainable. Now,
four years after its arrival, the law’s mandated program cuts and the
medical practices it encourages -- limiting unneeded procedures, and
keeping people out of the hospital longer -- are cited by economists as
key ingredients in trimming the nation’s medical bill. While the
recession has had an influence on the cost slowdown, it doesn’t explain
it all, according to policy analysts and the CBO.
“When the CBO
goes back and revises their baseline, historically they’ve adjusted
upwards,” said Tricia Neuman, director of the Kaiser Family Foundation’s
Program on Medicare Policy. “So the fact that there’s been
year-after-year downward adjustments is fairly remarkable since they
occurred after the ACA” was signed into law.
While total health
spending will still rise over the long run, the slower-than-expected
growth predicted within the next five years has “sharply improved the
nation’s fiscal outlook,” Jason Furman, chairman of the Council of
Economic Advisers, wrote on the White House blog.
GDP Effect
National
health-care expenditures will be 18 percent of the gross domestic
product in 2019, according to the CMS report. That’s 1.5 percentage
points lower than the agency’s projection in 2010 for the same year.
At
the same time, the slower growth in spending is credited with
prolonging the life of Medicare’s main trust fund to 2030, four years
later than was projected by federal officials just a year earlier,
according to a July report.
Understanding how the Affordable
Care Act is contributing to the downward trend can be important for
lawmakers setting health-care policies for the future, Kaiser
Foundation’s Neuman said. For instance, if the hospital readmission
fines that are part of the law are working to appropriately reduce
unneeded procedures and saving money, that’s something they’d want to
continue, according to Neuman.
Policymakers may also be encouraged to pursue similar efficiencies elsewhere in the medical system, she said.
Fresh Eye
Supporters
of the Affordable Care Act known as Obamacare say that’s what the law
was designed to do from the beginning: bring a fresh approach to how
medical care is managed in the U.S. The defined funding cuts that
offered the most direct cost savings were just one part of the law’s
design.
“There’s been a lot of movement away from ‘everything
you do earns you more,’” said David Cutler, an economist at Harvard
University in Cambridge, Massachusetts, who was previously a senior
health-care adviser for the Obama presidential campaign.
“Hospitals
are being penalized for readmissions, so readmissions to hospitals are
way, way down,” Cutler said in a telephone interview.
Federal
payments for hospital admissions will fall $756 million next year as
penalties stiffen for incidents when patients contract infections while
admitted, and when patients are readmitted within 30 days, CMS said last
month.
Detractors “predicted the hospital cuts would put
hospitals out of business but they had it all wrong,” Cutler said. “So
far we’ve seen the good effects without any of the downsides that people
had worried about,” effects that “were not given credit at the time”
the law was enacted.
‘Cost Effective’
“People do take
the lead from their doctors,” said Paul Van de Water, a senior fellow at
the Washington-based Center on Budget and Policy Priorities. “That
organized medicine is finally paying more attention to whether
procedures are cost-effective is very helpful.”
While many
analysts agree the Affordable Care Act has contributed to lowered
spending estimates, some question whether the changes can last in the
long run.
Consumer discontent that they may not so easily get
all the medical services they had in the past may force some services to
be reintroduced, said Doug Holtz-Eakin, a former head of the CBO who
now leads the American Action Forum, an advocacy group opposed to
Obamacare.
“There was $700 billion in Medicare cuts,” he said in
a telephone interview, referring to the Affordable Care Act’s estimated
savings from 2013 to 2022. “It’s true that’s a big number in spending,
but if it’s unsustainable, we’ll end up doing a U-turn.”
Recession’s Role
Another
disputed point is the role that the recession played in slowing down
health-care costs, as the magnitude of that factor will effect how much
spending increases when the economy fully recovers.
‘The great
recession had a very substantial impact on the slowdown of the rate of
growth of health-care costs,’’ said Steve Bell, senior director of
economic policy at the Bipartisan Policy Center in Washington. “As more
and more people feel the recovery,” health-care inflation can be
expected to rise, he said.
The CBO published a paper last year
saying that evidence doesn’t show demand for health care by Medicare
beneficiaries was diminished by the economic slump. That suggests
spending in that program, at least, will likely not be affected.
Generic Medicines
One
other contributing factor to the cost savings has been the increased
use of less-costly generic medicines over the past five years as a wide
variety of top-selling drugs, such as Pfizer Inc. (PFE:US)’s Lipitor for cholesterol control, passed their patent protection periods, according to Bell.
Now,
costly new drugs such as Gilead Sciences Inc.’s $1,000-per-pill
hepatitis C treatment have appeared in the marketplace, he said.
“We
do see drug costs starting to increase again,” Bell said. “It’s going
to be hard to deny payment for new highly expensive drugs that are
coming out for some types of cancer and hepatitis C.”
About
350,000 Medicare beneficiaries have hepatitis C, according to Neuman of
the Kaiser Family Foundation. If 75,000 enrollees were to be treated
with Gilead’s drug, this would increase federal spending in Medicare’s
outpatient prescription drug program by 8 percent, Neuman wrote in a
June blog post for journal Health Affairs.
‘Big Puzzle’
“The
specialty drugs are one piece of a really big puzzle,” Brian Collins, a
health policy analyst who works with Bell at the Bipartisan Policy
Center, said by telephone. “CBO certainly doesn’t know anything more
than the rest of the world about how much that’s really going to cost.”
In
the long run, the agency still expects health spending to rise
significantly, especially as the U.S. population ages, so the lowered
estimates in the next few years only buys short-term gains, and should
not lead to complacency, the policy analysts said.
“It’s been an
environment of big changes in the economy and in the law, and it’s hard
to sort out what’s permanent,” Holtz-Eakin said. “Time will tell.”
source
Monday, September 8, 2014
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