For better or worse, Twitter can change the world. I got a whiff of that potential last spring,while participating in a regular Twitter chat (#eldercarechat), someone raised (Tweeted?) the question of what we want government to do to improve thelives of the nation’s 60 million caregivers, and added that weneeded something like a PeaceCorps for family caregivers. That idea resonated with me—and with what I myself need at thisjuncture in my life. My young adult children, five between the ages of 19 and 23, struggle to find work—regular work, much less meaningful work—so that they can pay their bills, including college tuition and loans.
My 92-year old grandmother has moved to Alaska to be with my aunt, and spends many of her days alone, her mind still longing for human connections, her body unable to gether there. What if we could buildsomething akin to the Peace Corps,a national program that could simultaneously address a spectrum of issues, such as workforce development, economic security, intergenerational respect, skillbuilding, and national service?
What if a program existed that could, for instance, employ my 20-something kids, rely on the skills and experience of retirees, like my own 69-year-old parents,and provide companionship to mygrandmother?What if we had a CaregiverCorps? I tweeted. Within a day, I had launched a petition to the White House calling for Americato create such a Corps. Within a month, the New Old Age blog of The New York Times had featured the idea.
Even now, late summer, the idea continues to be discussed: mentioned in the Times, and talked about online. Moving from something as ephemeral as a Tweet to somethingas enduring as a national program, of course, will take more than a season. To that end, I have spent subsequent months writing about the idea for various online platforms, and networking with individuals and organizations who are intrigued by the possibility. Anne Montgomery, my colleague at the Center for Elder Care and Advanced Illness at Altarum Institute and a veteran Hill staffer, has done the same.
One hesitates to make too much of a single report, but the Altarum Institute’s July Report, “Health Care Price Growth at 20+ Year Low,” certainly commands one’s attention. According to Altarum’s analysis, the health sector pricing trend ran at a 1.0 percent annual rate in May 2013, lowest since January of 1990. What is striking about Altarum’s health care pricing trendline is that it has declined for the last three years in spite of an alleged economic recovery.
It also runs parallel to a subsiding utilization trend, suggesting that the health sector has been unable to offset reduced utilization with price increases. Since the beginning of the recession, pricing has subsided from double the rate of the GDP deflator to parity, and it has closely tracked the deflator with only two deviations for more than eight years. Clearly, something more than the recession is at work here.
These trendlines confirm what this observer sees from his contacts in multiple sectors of the health industry: a widespread and durable “top line flu”. The growth in enterprise revenue for most health providers and manufacturers has been static (e.g. very low single digits or actually declining) over the last two years. Most investor-owned hospitals, pharmaceutical companies, device manufacturers, and physician practices (pretty much everyone except the consultants and IT vendors) have reported both revenue stasis and earnings compression.
My economist friends point to rising consumer copayments as inhibiting price increases. The Kaiser Family Foundation has reported almost a quadrupling of the number of covered workers in high deductible health plans (from 5 percent to 19 percent) since the end of the recession. It is also possible that a disinflationary mindset has inhibited providers and suppliers from seeking outsized price increases to compensate for lost sales volume. For suppliers, the marked decline of “physician preference” marketing has also hurt both sales and margins.
Hospital pricing. Performance of hospital prices will provide more fodder for those concerned about hospital consolidation pushing prices up. On the one hand, overall hospital prices rose an annualized 1.8 percent for May 2013, fractionally higher than the consumer price index (CPI) at 1.4 percent. However, when one strips out the “administered price” portion (Medicaid and Medicare), hospital prices to privately insured patients rose 4.8 percent annualized in May, nearly five times rate of health prices as a whole. Altarum suggests that cost shifting might explain this significant disparity. However, even this increase to private patients was not enough to raise overall health costs significantly.
Government payment to hospitals has trended lower for multiple reasons. Many state Medicaid plans have cut hospital rates in the past several years to help balance state budgets. And in addition to the ACA’s mandated reductions in hospitals’ disproportionate share payments and DRG updates, the sequester took a significant further bite out of DRG payments during the winter.
Since most hospital contracts with private insurers are multi-year, it’s difficult to argue that compensating upward revisions in private health insurance contract rates would yet be reflected in national economic statistics. Moreover, not all hospitals are part of systems capable of exerting pricing power on private health plans. Have-not hospitals have had their prices constrained by payer contracts, compensating for the effect of leverage by market hegemons. We’ll have more evidence in a year to confirm or disconfirm the cost shifting/pricing power hypothesis.
There’s another indicator of a tougher hospital pricing environment. According to the Advisory Board’s Dan Diamond, hospital employment has actually contracted in one-quarter of the monthly jobs reports from the Bureau of Labor Statistics since January 2009, including a 6000 person force reduction in May, 2013. On balance, hospital executives would much rather raise rates than lay off staff, so the fact that the nearly unbroken decades-long expansion of hospital headcounts is faltering suggests a very difficult pricing environment for hospital services.
While Washington wonks continue to bicker over health policy, positive change is occurring outside the Beltway.
Last week, the Altarum Institute, a research organization based in Ann Arbor, Michigan, reported that the moderation in the growth of health-care costs we have seen over the past few years is continuing: Total health spending rose by less than 4 percent from February 2011 to February 2012. And it’s encouraging to see the progress that doctors, hospitals and other providers are making to improve the value of care — by cutting back on unnecessary procedures, for example, expanding their use of information technology, and switching from fee-for- service to compensation schemes aimed at maximizing the quality of treatment.
Instead of examining these changes and finding ways to encourage them, the Washington policy discussion continues to demonstrate its ability to, well, it’s not clear exactly what it does. The most senseless bloviating recently came from Charles Blahous, a senior research fellow at George Mason University, in Arlington, Virginia, and a former official in the George W. Bush White House. He claims to have shown that the 2010 health-care reform act will substantially increase the budget deficit, despite official estimates to the contrary. The Washington Post decided this warranted prominent coverage.
What Blahous actually did was play a trick. His analysis begins with the observation that Medicare Part A, which covers hospital inpatient care, is prohibited from making benefit payments in excess of incoming revenue once its trust fund is exhausted. He therefore argues that the health reform act is best compared to a world in which any benefit costs above incoming revenue are simply cut off after the trust-fund exhaustion date. Then, he argues that since the health-care reform act extends the life of the trust fund, it allows more Medicare benefits to be paid in the future. Presto, the law increases the deficit by raising Medicare benefits.