Actuaries at the Centers for Medicare & Medicaid Services, a government agency, have just updated their estimate of future health spending:
For 2018 and beyond, both Medicare and Medicaid expenditures are projected to grow faster than in the 2016–17 period, and more rapidly than private health insurance spending, for several reasons. First, growth in the use of Medicare services is expected to increase from its recent historical lows (though still remain below longer-term averages). Second, the Medicaid population mix is projected to trend more toward somewhat older, sicker, and therefore costlier beneficiaries. Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result. And finally, growth in the demand for health care for those with private coverage is projected to slow as the relative price of health care—the difference between medical prices and economywide prices—is expected to begin gradually increasing in 2018 and as income growth slows in the later years of the projection period.
Peter Orszag….. cited the fact that knee replacements are much more frequent in Milwaukee than in Manhattan, and he's right. But….. Milwaukee's greater use of knee replacements is not because nefarious doctors are bilking the system and that 30% of health care spending could be saved by stopping such waste.
The reason is that Milwaukee is within a cluster of states with high rates. They extend from Idaho to Michigan and from Kansas to North Dakota, but they don't stop there. High rates continue into Saskatchewan, which sits atop North Dakota and has the same high rates, and into Ontario, which sits above Michigan and shares Michigan's high rates. Knee replacement rates in these states and provinces average 70% higher than in regions with the lowest rates….. Saskatchewan and Quebec are as different as North Dakota and New Hampshire. How interesting that two neighboring countries with two different health care systems have identical patterns of geographic variation – a phenomenon that knows no borders…… more.
Doctors, hospitals, drug companies and insurers are presenting President Obama with a ten year plan today. They vow to cut the growth rate of national health care spending by 1.5 percentage points each year – an amount that's equal to over $2 trillion – over the next 10 years.
And what new, exciting and innovative ideas do they have that no one else has thought of before?
Signers of the letter said that large amounts could be saved by aggressive efforts to prevent obesity, coordinate care, manage chronic illnesses and curtail unnecessary tests and procedures; by standardizing insurance claim forms; and by increasing the use of information technology, like electronic medical records.
The New York Timesreports that spending differences grow wider, with no apparent effect on outcomes:
Medicare spending [in Miami] rose 5 percent a year from 1992 to 2006, compared with 2.4 percent in San Francisco, according to the Dartmouth group. Medicare spent about $16,000 per enrollee in Miami in 2006, compared with about half as much in San Francisco.
Medicaid and SCHIP effectively get discounts by paying providers below-market rates. But as more people enroll in these plans providers will need to shift more costs to commercial payers. That’s the conclusion of a report released by the Colorado Department of Regulatory Agencies. Continue reading As Congress Expands Medicaid/SCHIP, Expect Everyone Else’s Costs to Rise→
Universal coverage is all gain, no pain, according to Jon Gruber, writing in the New England Journal of Medicine:
Increasing consumer spending: In the late 1980s and early 1990s… families thatgained insurance coverage…increased their spending on other consumer goods – byan average of about $800 per year in today's dollars.
Eliminating Job Lock: Fear of leaving jobs that come with health insurance for those that do not… reduces job-to-job mobility among the employer-insured by as much as 25%.
Creating a huge jobs program: Shifting the focus of the health care system from specialists to preventive care practitioners… such as… nurse practitioners and registered nurses… could provide a landing spot for workers displaced from other sectors of our economy.
Being better prepared for the "herculean efforts" needed for entitlement reform: The future obligations of the U.S. government for the Medicare program alone, minus any Medicare payroll taxes collected, will be more than $70 trillion – an amount that is seven times that of our national debt.
This is Victor Fuchs, writing in the New England Journal of Medicine:
Over the past 30 years, U.S. health care expenditures havegrown 2.8% per annum faster, on average, than the rest of theeconomy. If this differential continues for another 30 years,health care expenditures will absorb 30% of the gross domesticproduct – a proportion that exceeds that of current governmentspending for all purposes combined.
This is from Andy Biggs' American Enterprise Institute paper on the causes of our future entitlement spending crisis:
A new consensus on entitlement reform has developed in Washington: rising per-capita health care spending is the only real crisis besetting the government's entitlement programs, while America's aging population and Social Security play minor roles at best….But this new consensus is flawed.
Over the next twenty years, fully 60 percent of total entitlement spending increases will stem from population aging. It is not until 2045 that per-capita health care spending growth becomes the more important factor.
In present-value terms, over the next seventy-five years, Social Security, Medicare, and Medicaid will cost an additional 5.7 percent of GDP, and the cost increases will be split almost evenly between population aging and excess health care cost growth.
Americans without health insurance will spend about $86 billion on health care this year. Of that amount, $43 billion will come from government programs and $30 billion will be spent out-of-pocket. The remaining shortfall of $13 billion (presumably shifted to other payers) is a little more than one-half of 1% of the nation’s annual health care bill.
Full study [gated, but with abstract] is at Health Affairs online. Wall Street Journal article is here. Hat tip to Tom Miller.