October 21, 2014

Mixed Picture on Health Care Costs

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

Cost inflation in health care slowed significantly between 2009 and 2011, and updated projections from the Medicare actuaries point towards slower growth in 2012 and 2013 as well. But Joshua Gordon, policy director for The Concord Coalition, says the new numbers probably reflect temporary factors and “cannot serve as an excuse for politicians to rest on their laurels.”

Spending is expected to grow at an annual average of .9 percent above overall economic growth between 2011 and 2021 – relatively good news in light of the fact that health care costs have historically gone up 2 percentage points faster than the Gross Domestic Product (GDP).

“Most health care experts agree that the recession is the driving force behind the slowdown,” Gordon writes in a recent blog post, “although some also highlight changes that insurance companies, hospitals and physician groups have been making either because of the ACA (Affordable Care Act) or in anticipation of its full implementation.”

Eventually, however, the actuaries think the growth in health care spending will return to 2 percentage points over GDP. This, Gordon explains, is because “the actuaries assume the aging of the population, the increase in the newly insured under the ACA, and renewed economic growth will put upward pressure on spending that will outweigh the efforts in the ACA that are designed to restrain cost growth.”

Much could depend on how the Supreme Court rules on the ACA this month. If the court rejects some or all of the law, elected officials must resist the temptation to maintain or renew its popular coverage provisions without restraints on cost growth, which tend to be less popular. Even if the court upholds the law, Gordon says, further efforts will be needed to rein in costs.