Last month I wrote about how the cost of employer sponsored health insurance had slowed in the last year or two. Most people believe that this is because of the fact that health care spending has slowed over the past few years as well. For instance, Austin noted that the annual growth in per-beneficiary spending in Medicare has been slowing dramatically recently as well. Is this because the economy has been slow? Or is it because parts of Obamacare have already begun to have an effect on spending nationwide. A number of economists have suggested that it’s the latter, meaning that although many dislike the Affordable Care Act, some of its cost-containment effects may be working. But what will happen in the next few years, as coverage expansions kick in? What will happen as the economy recovers? A just-released manuscript in Health Affairs by economists at CMS attempts to answer that question. First the good news:
Health spending growth through 2013 is expected to remain slow because of the sluggish economic recovery, continued increases in cost-sharing requirements for the privately insured, and slow growth for public programs. These factors lead to projected growth rates of near 4 percent through 2013.Perhaps “mixed” news would be more accurate. We are expected to continue to benefit from the slow economy with accompanied slow health care spending growth. Of course, a slow economy has other detrimental effects. Slow growth of public programs can be a good thing if waste is eliminated, but can also lead to decreased coverage and access. And increased cost sharing can have detrimental health effects as well. Here’s what we can expect in the future:
[I]mproving economic conditions, combined with the coverage expansions in the Affordable Care Act and the aging of the population, drive faster projected growth in health spending in 2014 and beyond. Expected growth for 2014 is 6.1 percent, with an average projected growth of 6.2 percent per year thereafter. Over the 2012–22 period, national health spending is projected to grow at an average annual rate of 5.8 percent.If health care spending growth would remain at the low rates we’re seeing now, many of the doomsday projections we’ve been concerned about would likely not come to pass. If it went back to the extreme growth of the years before the slow down, it would be time to panic. What is expected is somewhere in between. As the economy recovers, so will spending growth. The Affordable Care Act will also result in an increased amount of spending, as subsidies in the exchanges and the Medicaid expansion will not be free. The aging population of the United States will also contribute to growth of spending. This growth may be slower than we’d feared, but it will still be plenty fast. The study predicts that government spending alone on health care will reach $2.4 trillion by 2022. That will be almost half of all health care spending, and isn’t much less than the total amount ($2.8 trillion) we’re spending on health care right now, public and private. There’s plenty more detail in the report, and I suggest you go read it in full. It’s important to remember, of course, that these are best guesses. If the economy fails to recover as hoped, or if it recovered faster than we think, the projections could change significantly. It’s also possible that the Affordable Care Act could be more or less expensive, or have more or less of an effect on cost-containment. Only with time will we know for sure. But this report tells us that our work isn’t done. Even if things go as we predict, there is still plenty of work to do to try and reduce our health care spending. It’s projected that health care spending will continue to grow more quickly than GDP for the foreseeable future for some time. That can only go on for so long. –Aaron