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So what’s up with health care costs?

Actuaries are projecting health care costs will increase 5.8% annually over the next 9 years. Others think that increases will be significantly smaller.

While the 5.8% is a bit higher than we’ve seen of late, it is a heckuva lot lower than the average for the last three decades.

Currently health care is responsible for 17.4% of US GDP; if the inflation rate prediction holds true and other economic sectors also grow as projected, health care will account for one out of every five dollars in ten years (19.6% to be precise).

We do know that the prediction will prove to be somewhat wrong, and economic growth for the next quarter is hard enough to predict, making a ten-year projection the proverbial dartboard in a dark room.  So, what’s with the discrepancy between predictions?

The actuaries responsible for the 5.8% figure believe the soft economy over the last few years has been the primary driver of low health care cost inflation.  Their thinking is that now the the economy is back to steady and significant growth, demand and prices will both heat up.

The counter-argument attributes the recent happy days of low medical cost inflation to structural changes in the health care delivery system. Their view is these changes, while overwhelmed somewhat by the big increase in the insured population due to PPACA, will help keep cost growth low as they become increasingly commonplace.

At this point, we just don’t know; there is anecdotal evidence that medical homes work and don’t; that ACOs are a success and a failure; that behavioral changes are working and are non-existent. That is far from surprising; we are still pretty early into this process, a process which is massively changing almost one-fifth of our nation’s economy.

What does this mean for you?

The key message is costs will continue to increase, with health insurance cost increases somewhat mitigated by higher deductibles and copays.

What’s also very clear is the health plans that are able to deliver lower costs and sufficient outcomes will do very well.



2 thoughts on “So what’s up with health care costs?”

  1. Good Spin Joe,

    ACA wss supposed to be decreasing health care costs. So ANY increase isn’t doing what it said it would do. We all said health care costs were way too high and were not affordable, BUT liberals swore health care was not affordable already and that this would fix that. They said not only would we have lower health care costs but it would provide affordable health care to everybody,. Not only is health care not affordable to those on Obamacare but they are far from affordable for us that work for a living and is provided partly by our employer and have 2000 + dollar deductible before Insurance even pays Plus Premiums to or employers, Plus copays even after that.. “Any” increase no matter what the comparison is , iS still an increase in what already was not affordable to most Americans. As I said from the beginning, 2016 and 17 is when and where everyone will feel the “real” effects of what this is going to do to our country and our healthcare system and it is not going to be a pretty picture. so let’s not add all the fluff , bottonm line…its an increase across the board and unaffordable even more so to all.

    1. Just
      Thanks for the comment.
      I don’t recall your comment here under this email so perhaps you made your prognostication elsewhere.

      Curious as to where you got the idea that proponents claimed ppaca was going to reduce the cost of medical care; I can’t locate a source for that claim. Please provide a citation.

      I do recall talk of bending the cost curve; as noted in my post we still don’t know if ppaca’s impact has had this effect. We do know that cost increases have been quite low over the past four years. Which, perhaps coincidentally are the years After ppaca implementation began.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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