President Obama rarely shies away from an opportunity to tout successes in U.S. health care, but in last night’s State of the Union oddly omitted any mention of the new and optimistic report about U.S. health spending from actuaries at the Centers for Medicare and Medicaid Services (CMS).
The finding: from 2009 through 2012, health care spending in the U.S. grew at the slowest rate since the government started collecting this data in the 1960s.
The actuaries found that in 2012 spending “stabilized,” growing by 3.7 percent in 2012, and health care accounted for a slightly smaller percent of GDP than the prior year, 17.2 percent versus 17.3 percent in 2011.
Perhaps an actuarial report proclaiming stable growth doesn’t make for much of an applause line for a State of the Union speech. But for confessed policy wonks like me, it’s as good as a Hollywood blockbuster.
So get out your popcorn, here are five Hollywood moments in the report.
1. Ninja Combat
When the report came out in early January, the Obama administration quickly ascribed the good news to Obamacare. But, lo and behold, the actuaries wielded their slide rules like weapons.
They respectfully disagreed with their president, pointing out that few of the provisions in the health reform law were actually in place during the slow-growth years in question. The actuaries conclude that most of the cost stability results from the economic recovery process.
Given the silence in the State of the Union, they may have been given the last word on the subject.
2. Plot Twists
While refusing to associate Obamacare with the successes in the report, the actuaries did credit at least some of the cost control to trends that derive from Washington policies. But in a twist, those policies don’t come from the current occupant of the White House, but from the last one.
Specifically, the actuaries cite the growth of high deductible health plans (HDHPs) as a factor in controlling health costs. HDHPs are plans, with deductibles as high as $1000 or more, forcing consumers to pay out of pocket the full cost of services like certain doctor visits or tests that traditional insurance would ordinarily have covered.
In exchange, consumers get a big break on the premium and they can use tax-advantaged health savings accounts to pay for those expanded out of pocket costs.
HDHPs came about from a hotly contested provision in the Bush Administration’s Medicare prescription drug coverage back in 2003, later enhanced in 2007, which expanded medical savings accounts and renamed them Health Savings Accounts (HSAs), and created some tax incentives to encourage HDHPs.
Today, as the actuaries point out, HDHPs cover one in five workers.
Many Democrats opposed the Bush provisions, suggesting that people would avoid needed care if they were forced to pay the full cost out of their pocket. This remains a reasonable concern closely watched by policymakers and researchers. But in yet another twist, Democrats’ signature health law promises to accelerate the trend.
Obamacare’s state exchanges, include many plan offerings, particularly “bronze” plans, with deductible levels unheard of prior to the advent of HDHPs.
The report details major variations in growth among different industry sectors of health care. Who are the heroes and who are the villains? Forget the usual suspects. Two industry players we love to hate come out shining in this report: health plans and pharmaceutical companies.
Health plan administrative fees are down, and there’s only a slight sliver of growth in pharmaceuticals. Indeed, without these two industry segments, we wouldn’t have any good news about health costs at all.
By contrast, hospitals and physician services have grown significantly, far ahead of inflation, up 4.9 percent and 4.6 percent respectively. The actuaries say this is not driven by price increases, but instead by “increases in the volume and intensity of services provided.” This is an ominous sign.
With pressure to lower prices, perhaps hospitals and doctors are ratcheting up the volume of care, whether or not the care is needed. This is a known tendency in the health care system; the IOM estimates that upwards of a third of health care spending goes to unnecessary or wasteful services.
Cynical though it may sound, unlike other industries, health care providers create their own volume by ordering services for their patients/customers. Consumers and purchasers will be wise to watch this trend and get second opinions.
4. The Bagman
In the middle of one of the report’s charts showing dozens of different kinds of cost growth rates, almost all ranging from 1 to 5 percent, there’s a number that stands out like a sore thumb: 15 percent. That’s growth in Medicaid spending by state governments. The actuaries say the stimulus bill in 2008 added federal support to the states for enhanced Medicaid.
Then the stimulus money ran out, and as this report starkly shows, the states are left holding the bag.
5. The Sleight of Hand
Here’s a quiz for you. Which payer funds the biggest chunk of U.S. health spending?
D. Health plans
Correct answer: E.
What exactly is “Other”? Look in the mirror. Shockingly for all of us who think government and health insurance will take care of us when we are sick, in fact the largest spender on health care is you, the American consumer. The report shows that household spending—on the combination of health insurance premiums and out of pocket costs—is the source of 28 percent of the dollars in our $2.3 trillion healthcare system, more spending than any other sector.
For the enormity of that investment, consumers are treated as the anonymous “other,” dependents of the more powerful behemoths like health insurance companies or Medicare. But that perception is why providers hop to it when Medicare makes a tiny change in its reimbursement schedule, but your call button doesn’t work.
Though there are Hollywood moments here, there’s no Hollywood happy ending yet. The cost report is mixed, with both positive and negative signs.
We may or may not be seeing the impact of Obamacare, but we are seeing the impact of the American consumer and the business community.
They have much more influence than they know, if we could just get them to pay attention to our Ninja actuaries.
Leah Binder is the CEO of The Leapfrog Group, a voluntary program aimed at mobilizing employer purchasing power to alert America’s health industry that big leaps in health care safety, quality and customer value will be recognized and rewarded.
She blogs regularly at Forbes, where an earlier version of this piece appeared.