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Bankrupt Healthcare
Slowdown or Not, Health Care Reform Is Still Needed

Wonks on both sides of the aisle have been excited by several recent reports showing that spending on health care is slowing down. But on Wednesday the Center of Medicaid and Medicare Services poured some cold water on this enthusiasm by releasing a report predicting that recent reductions would reverse themselves. The WaPo:

If the CMS actuary’s 2013 estimates are on track, overall health-care spending will stay at 17.2 percent of the national economy for the second straight year. That won’t last, though. The CMS actuary is expecting health spending to grow 5.6 percent in 2014, partly because of Obamacare’s coverage expansion to previously uninsured individuals, as well as the law’s more generous coverage requirements. The actuary is expecting the growth in health spending in 2015 to slow down to 4.9 percent, mostly due to payment reductions in Medicare Advantage and Medicaid. Health spending will then pick up again, growing a projected 6.1 percent per year between 2016-2023, the actuary said.

The CMS report is, as predictions like these tend to be, not the definite last word. Over at the New Republic, Jonathan Cohen notes that CMS actuaries tend to be cautious in their estimates, so these numbers could turn out to be wrong. Moreover, the report still shows the coming years beating the historical average of health care spending growth from the 90s and early 2000s. Pundits will continue to debate these reports, but all predictions seem, at this point, contestable. In short, we don’t really know whether the slowdown will continue, and how much we may or may not save from it.

The important point, however, is that with or without a prolonged slowdown, U.S. health care is still in trouble. If per capita Medicaid spending is falling,  for example, the number of the people in the program is growing. And even if overall health care costs are growing at a slower rate, they are nevertheless still growing. Understanding why the slowdown has (or hasn’t) happened is important because it can provide us with clues for future reforms. For example, it would be useful to know whether high deductible plans are driving a slowdown, as previous studies have suggested. But whether or not the CMS report is right, those reforms will still be necessary.

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  • lord acton

    Looks like we are headed towards one heck of a guns or butter showdown. Resurgent Russia, Rising China, Collapsing Middle East North Africa all will demand increased defense spending whether we like it or not. But the aging populations in the Western nations all will want their entitlements. Maybe social security recipients could be drafted to fight overseas. Many of them have military experience, so it could work out on multiple levels [this is said in jest].

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