U.S. will spend $2.6 trillion less on health care than expected before Obamacare, study projects

A new study predicts that the federal forecast of national health care spending under President Obama’s signature health law was a big overestimate — by $2.6 trillion over a five-year period.

Expanding health insurance coverage to millions of Americans was bound to increase overall spending. After the Affordable Care Act was passed in 2010, the actuaries for the Centers for Medicare and Medicaid Services projected that, as the economy recovered, the historically low growth in health spending would return to higher levels, reaching $4.6 trillion by 2019. But in the intervening years, the annual expenditure increases have been more modest than expected, and the new estimate from the Urban Institute suggests national health spending is on to track reach $4 trillion by 2019.

“When CMS originally made those projections, they really thought the slowdown in health-care spending [growth] was mostly due to the recession, and afterward we’d see a return to the higher rates of spending growth — and that didn’t really happen,” said Katherine Hempstead, a senior adviser at the Robert Wood Johnson Foundation, which funded the new study by the Urban Institute.

Looking forward, the study’s authors also point to recent evidence that a 2014 uptick in health spending that had seemed to signal a return to higher growth may have been temporary. If slower growth persists, they argue that it will become harder to argue that it is just the economy and not the cost containment policies enabled by the Affordable Care Act that are tempering spending.

Hempstead said it’s becoming increasingly plausible that the federal policies included in the Affordable Care Act — and its ripple effects as programs implemented within Medicare influence the private market — are having a tempering effect.

It’s incredibly tricky to dissociate the cause of any particular policy on the effect of health-care spending. In addition to the Great Recession, reimbursement cuts because of sequestration would have had an effect on spending and the Supreme Court decision to make the expansion of Medicaid optional also reduced spending compared with the original projection.

A Kaiser Family Foundation analysis from 2013 found that about three-quarters of the slowdown could be traced to the sluggish economy, and attributed the rest of it to various other factors.

“The hangover from the Great Recession has had significant effects on consumer spending in general, and health spending specifically,” Larry Levitt, a vice president at Kaiser, said in an email. But, he added, the Affordable Care Act “has clearly had a large and direct effect on slowing down health spending in Medicare. Its effect on the rest of the health system is somewhat more speculative, but I believe it’s real.”

Hempstead thinks that some of the policies that came with health reform have contributed. For example, she pointed to a policy that was intended to cut hospital readmissions by introducing financial penalties for hospitals with excessive readmissions. Being readmitted to the hospital isn’t good for patients or for payers — a report by the Agency for Healthcare Research and Quality found that 3.3 million adult hospital readmissions racked up $41.3 billion in hospital costs in 2011. Hospital readmission rates fell after the Affordable Care Act was implemented, both for conditions targeted by policy and those that weren’t.

But another factor that Levitt and Hempstead pointed to was the increase in deductibles. Research has shown that patients with high-deductible health plans simply avoid the use of health care altogether while they are on the hook for their health care costs.

If that’s what’s happening, it could look good for reining in spending in the short term, but may not save money in the long run — or be good for people’s health.

source: washingtonpost.com By Carolyn Y. Johnson

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