Statistics can be used by folks to prove or disprove just about anything. The current mad publication of all sorts of data concerning health care costs is no exception.
A lot of media space has been devoted over the past several decades to the state of health care costs in America. One of the promises of Obamacare was to control health costs. In fact, Obamacare does nothing to control these costs at the consumer level, but the politicians are sure taking credit for a spate of recent data that tends to show that health care costs are increasing at their lowest level in almost 2 decades.
Yes — that’s correct. Healthcare costs are still increasing (note**above the level of consumer price inflation), just at the lowest level of increase in some time. Does this prove that the government has gotten control of healthcare costs? Tell you what — let’s ignore the political hyperbole and look at some numbers.
Let’s just get this out of the way up front. Obamacare and Medicare/Medicaid cannot control costs, of any sort, at the market level. All it can do, which in fact these programs do, is control the amount of reimbursement for specified benefits. This is particularly notable within Medicaid and Medicare, and is also true of TriCare. Since Medicare alone covers almost 48 million people and increasing, with about another 15 million on Medicaid, the impact of controlling reimbursement levels to providers and hospitals for these eligible people is significant (feel free to substitute the words “limiting” or “rationing” for ‘controlling’ — it’s the same thing).
Now, how about some real world facts. CMS (Centers for Medicare and Medicaid Services) forecasts that national health care spending increased 3.6% in 2013 — the actual figures haven’t been calculated yet for last year. (why we’re getting excited over forecasts and predictions instead of real numbers is disconcerting) The journal Health Affairs surmises that this lower level of increase is due to the extended economic downturn since 2009, as well as the growth of high out-of-pocket health care plans, which are presumed to turn insureds away from seeking higher cost services. Is this a permanent trend?
Not likely — annual health care cost increases have averaged about 9% over the past 20 years, during which there have 2 major bear markets, and 2 minor economic downturns, after which health cost inflation also moderated. In fact, it is projected (referencing the same Health Affairs article), that health costs will increase by about 5.6% in the coming year. Why?
First, several million more people are entering the newly insured category, mostly through expanded Medicaid, with a smaller number through private health insurance plans. This creates an increased demand versus a decreasing supply (docs are leaving or merging practices in significant numbers).
Second, the population is aging. With increased age, comes increasing utilization, and increased costs, overall. In addition, up to about 300,000 new Medicare beneficiaries are enrolling in the government insurance program every month, therefore leaving the private health insurance space. In fact, economists project increases of 6.1% in years from 2016 on.
Third, assuming the economy continues to improve, however slowly, people will seek to receive more expensive care/treatment. By 2023, it is expected that health care outlays will consume about 19% of the overall gross domestic economy, up from 17% in 2012. Based on prior experience, this may be an optimistic assessment.
Recently released information about emergency usage since Obamacare took effect show that utilization of ER services has increased significantly::
New Medicaid patients are sicker and have flocked to hospital ERs at higher rates in states like Colorado that expanded Medicaid than in non-expansion states, according to a new study from the Colorado Hospital Association.
The analysis found that increases in ER usage jumped three times faster in states that expanded Medicaid compared to those that did not during the second quarter of 2014. Use of emergency departments increased 5.6 percent in the second quarter of 2014 over the same period in 2013 in states that expanded Medicaid. States that did not expand Medicaid saw more ER usage too, but at a lower increase of 1.8 percent during the second quarter of this year compared to last year. (source Health News Colorado)
Fourth, and by no means least, a fairly significant number of new, highly effective medications will be entering the market to attack previously intractable diseases. A few months ago, the drug Sovaldi was approved for treatment of Hepatitis C, a previously incurable disease. A 6-week regimen of the medication costs about $84,000, yet is being paid by many insurers and the government since the cost of related chronic pathologies are much higher. During the first week of September, the Japanese government approved a new PD-1 inhibitor medication to combat many forms of cancer. In Japan, it is projected that this medication’s annual costs will be about $143,000. It is expected to be approved soon within the US. A similar Rx, Yervoy, designed to activate the body’s own immune system to fight melanoma, costs about $120,000 for a full course of treatment. Several other PD-1 inhibitor candidates are undergoing testing with anticipated annual costs for treatment exceeding $100,000.
We haven’t even touched upon the impact of new treatment methods deriving from the latest technologies, or for the effects of cost shifting from government plans to private health insurance coverage in the new health plan design. These are impacts yet to be fully studied with new data.-->