Gov't report: Health cost relief only temporary

If only the economy were growing as fast.

Despite a recent easing of medical costs, the nation's health care spending will keep outpacing economic growth for the foreseeable future, government experts said Tuesday in a forecast that signals more upheaval for Medicare and Medicaid, as well as private insurance.

President Barack Obama's health care overhaul will add $478 billion in spending over the 2011-2021 period covered by the projections, expanding coverage to some 30 million uninsured people. But the issue of rising costs will not go away even if the Supreme Court overturns Obama's law or his Republican foes ultimately succeed in repealing it.

By the beginning of the next decade, health care spending will be growing roughly 2 percentage points faster than the overall economy, "which is about the same differential experienced over the past 30 years," said the report from Medicare's nonpartisan Office of the Actuary.

The findings have implications for both sides of the political divide. If health care spending isn't brought in line with overall economic growth, Americans will eventually face agonizing choices between paying medical bills and funding other priorities such as education and infrastructure.

By 2021, health care will account for nearly 20 percent of the U.S. economy, the report found, up from under 14 percent in 2000. Controlling costs is one of the keys to solving federal budget woes, but that probably can't be done without major changes to Medicare and Medicaid.

The annual spending projections usually attract little attention. But with health care a central theme both of the nation's polarized political debate and the federal budget, the report is now getting close scrutiny.

This year the biggest looming question has been whether fledging payment revisions in Obama's law, also mirrored by private insurance plans, are succeeding in holding costs down. The rate of growth the past three years has hovered under 4 percent, historically low. That's coincided with a shift to paying hospitals and doctors for better quality, not just their sheer volume of tests and procedures.

Obama has argued that his overhaul would begin to "bend the cost curve" to more affordable levels.

The analysts remained skeptical.

"We are certainly looking at that," Sean Keehan, a senior economist with the actuary's office, said of the health law's changes. "We are waiting to see that there is definitive evidence that these types of (policies) can lower growth and also extend over time."

Translation: Show me the green.

Keehan said the economy is behind the recent easing of cost pressures. People who lost jobs also lost health insurance. Patients with coverage put off elective surgery or expensive diagnostic tests to save on their copayments. Employers facing a loss of revenue shifted a bigger share of health care costs to their workers in the form of higher deductibles, the annual amount you pay before insurance kicks in.

"This really has to do with the lingering effects of the recession," said Keehan.

The report projects modest growth of just over 4 percent for the next couple of years. Then in 2014, spending will jump by more than 7 percent as the big coverage expansion in Obama's overhaul takes hold. Nearly 20 million uninsured people will be newly eligible for Medicaid, the federal-state insurance program for low-income people. And more than 12 million people will buy private coverage through new state health insurance markets.

Other, more fundamental, cost drivers include an aging baby-boom population and the spread of expensive new medical technologies.

From 2015-2021, the report projects health spending to grow an average of about 6 percent a year. By 2020, that works out to roughly 2 percentage points faster than expected economic growth, returning to a pattern that most experts say is unsustainable.

Published online by the journal Health Affairs, the report also contains nuggets that partisans are sure to turn into verbal grenades in the political warfare over Obama's health care law. For example:

— The new law will increase national health spending by nearly a half trillion dollars, not counting other costs related to its implementation. That's a big number, but in the grand scheme it's only about 1 percent of the $39.5 trillion the nation will spend from 2011-2021. The people newly covered are expected to be younger and healthier, contributing only marginally to rising costs.

— Some large employers with low-wage workers are expected drop coverage, opting to pay the government a fine and send their employees into Medicaid or the new health insurance exchanges where subsidized private insurance will be available. However, employer-based insurance will remain the largest single source of coverage, accounting for 171 million people in 2021. Medicaid, the second-largest, will cover 85 million.

— Government at all levels will account for nearly half the nation's health spending in 2021, up from 46 percent in 2011.



Health Affairs: