In the WSJ, American Interest board member William Galston explains why the long-term outlook for health care costs looks bleak. In the wake of data showing a declining rate of growth in national health care spending, some on the left have been quick to seize on this as evidence that the Affordable Care Act is working. Galston disagrees:
In a balanced analysis of the evidence issued in September, the Center for American Progress (CAP) gives the Affordable Care Act some credit for slower growth—for example, by providing incentives that lower the rate at which patients are readmitted to hospitals after being discharged. But CAP also finds that between 37% and 70% of the slowdown is attributable to the Great Recession, which reduced the demand for health-care services by consumers with private insurance.One recent study suggests that rising copayments and deductibles account for another 20%; other studies find that the number could be even higher. The use of new technologies has also moderated costs, and cheaper generic-drug prescriptions constitute a higher share of the total spent on medicines. The difficulty, the CAP report concludes, is that several of these factors had a “one-time effect” on health-care spending and “cannot be expected to moderate the growth of spending over the long term.”
Galston sees some good news, however, in the form of an experiment in Oregon that offers promise for bringing down costs. There, federal Medicaid funds were turned into a kind of compromise block grant, which the left typically opposes. But in this version the state got upfront funding for five years in return for meeting certain quality and cost metrics. Galston argues that it is on track to meet those metrics, with things like hospital re-admissions and overall spending on health care decreasing.Oregon has reached its savings and quality improvements through the establishment of what are called Coordinated Care Organizations (COOs). COOs integrate primary and preventive care to keep patients healthy and out of the ER. It remains to be seen whether the early signs of COO success Galston points to will hold up. The larger question is whether they can be scaled up to the national level; if so, savings for Medicaid could reach $900 billion over the next decade.Beyond that, the column offers three interesting takeaways. First, there is bipartisan agreement that Obamacare as currently implemented doesn’t solve the country’s health care problems. That the analysis comes from CAP, a liberal think tank, suggests that some on the left realize the following fundamental truth: absent other kinds of serious changes to health care delivery, the ACA won’t fix our medical spending problem. Second, even if COOs are ineffective, Oregon’s experimentation with them shows that the states can play a key role in devising new reforms. Third, the Oregon compromise suggest that Medicaid block grants could be the welfare reform of the teens: a longtime conservative idea that a critical mass of Democrats realize might actually work. That would be good news indeed.