In an op-ed in the Washington Post Drew Altman and Larry Levitt of the Kaiser Family Foundation warn that recent slowing of the rate of increase of healthcare spending may be illusory:
The idea that we have licked the problem of health-care cost increases is no more probable today than it was in the past.
Our nation has made no fundamental change in how health care is paid for or delivered.
Congress has not passed sweeping legislation to contain health costs, although it did make inroads into moderating the growth in Medicare and health-insurance premiums through the Affordable Care Act (or Obamacare, as it is sometimes known). Increases in Medicare payments to insurance companies, hospitals and other health-care providers are getting trimmed. And the law is fostering a number of small-scale experiments around the country that are showing promise in delivering health care more efficiently. Big increases in insurance premiums for individuals and small businesses are now scrutinized by federal and state officials, and insurers are required to provide rebates if their administrative overhead and profits are too high.
Still, if claims that the health-cost problem has been reined in seem like wishful thinking, that’s because they mostly are.
I think the situation is actually somewhat worse than they’re portraying it. Healthcare spending now comprises upwards of a sixth of the economy, rising towards a fifth. At that scale, a 20% increase in spending rather than a 30% increase, for example, means that half or more of the general rate of inflation can be attributed to increased healthcare spending. That’s something that will only be aggravated as healthcare, buoyed by its massive federal and state subsidies, grows to absorb more and more resources.
The authors go on to suggest that much of the slowing of the rate of increase can be attributed to the slow economy and patients deferring care. If that’s the case, an economic recovery would present a worst case scenario for healthcare spending increases. Healthcare spending would increase sharply, absorbing much of whatever economic growth we managed to achieve.
Healthcare spending isn’t the only area in which economic recovery could pose serious problems. For example, if interest rates rose faster than than income does, interest on the debt could devour the federal budget. We’ve deferred care on the healthcare system and may pay the penalty for it.
Price incidence.
I know, a broken record….
AS I think I said before, for the first time in nearly 40 years I see people taking cost issues seriously. Most of what we see is a bad economy, but costs are now on the radar.
Steve