Reports: Healthcare Spending to Stay Slow and Steady, Save Trillions

Two recent reports show more experts have cosigned on past studies that suggested a multiyear trend in record-low U.S. healthcare spending growth may not be a temporary fluke, and may realize still greater savings in the future.


An analysis by PwC's Health Research Institute projects 2014 medical inflation will be even slower than in 2013. Some of that slowdown is attributable to patients rationing their own care while recovering from the recession's blow to their finances. The Patient Protection and Affordable Care Act can also take credit due to its readmission penalties, according to the report.


The four factors that will put downward pressure on rising medical costs will outweigh the two factors driving it up. Consumer use of retail clinics, large employers contracting directly with major health systems for specialty care, anti-readmission policies from federal regulators and greater cost-sharing with patients via high-deductible plans all restrain spending increases in healthcare.


Those trends will combat opposing economic forces from the growing market for expensive biologic treatments and the consolidation of market power through hospital transactions and partnerships, which has accelerated more than 50 percent since 2009 and may lead to price hikes of up to 20.3 percent in the coming year, according to the report.


The Federation of American Hospitals commissioned a study by independent research firm Dobson DaVanzo, which estimated the spending slowdown, if it continues for the next 10 years, will save Medicare $2.6 trillion and perhaps narrow the overall federal budget deficit by $1 trillion in the same timeframe. Researchers argue the savings estimate is derived from policy and permanent structural changes, rather than the economy's cyclical ebb and flow.


The report notes, however, that greater cost-sharing presents a challenge for consumers driven by employer and payer decisions to raise out-of-pocket expenses. Authors also note that Medicare spending as a percentage of GDP will likely grow from today's estimated levels of about 3.5 percent to more than 6 percent by 2035 due to the aging U.S. population.


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