There appear to be several reasons for the decline in the health care cost inflation rate with a poor economy and resulting job loss and changes in benefit design often cited – rightly – as chief contributors. There’s some fear that an improving economy and higher employment will return us to the ugly days of 7+ percent health inflation rates.
Possibly. However there are indicators that changes to provider-payer contracts, a reduction in unused facility capacity, growth in medical homes and ACOs, changes in reimbursement methodologies, and less reliance on new technology are having an impact. These factors, and others unknown, look to be responsible for more than half of the decrease in inflation.
Here’s how the authors of a recent article in Health Affairs put it:
“we believe that current trends support cautious optimism that the spending slowdown may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country, among other factors.”
The implications are vast. At the highest level, lower medical trend allows employers and their employees to use cash for other purposes, alleviates some of the pressure for Medicare reform and reduces deficit and debt projections.
This last may be the most significant implication – an analysis indicates public-sector health spending over the next ten years may be $770 billion lower than projections.
What does this mean for you?
Those of us with grey hair and fading eyesight have seen too many of our hopes for cost control crushed to get overly excited. Nevertheless, this is far better than the proverbial stick in the eye…