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Fri Apr 13, 2012, 04:47 PM

Bending The Health Care Cost Curve: More Than Meets The Eye?

During the past months, a number of important articles have appeared in the healthcare literature on the subject of the recent slowing of health-spending growth in the U.S. In an article in January’s Health Affairs, economists at the Centers for Medicare and Medicaid Services suggest that the recession, even though officially ending in mid-2009, was the major factor in “extraordinarily slow” spending growth of 4.7 percent in 2008 and 3.9 percent in 2010, down from 7.5 percent in 2007 and double-digit growth in the 1980s and 1990s. Also citing recessionary causes, a report from the McKinsey Center for U.S. Health System Reform specifies declines in the rate of overall spending growth for eight consecutive years, from 9.2 percent in 2002 to 4.0 percent in 2009.

The purpose of this commentary is to suggest—through observations and data analyses—that independent of the recession, other fundamental and structural changes are likely contributing to the flattening of the cost curve, and further, that these changes have the potential to significantly alter the curve’s path into the future. Two independent analyses support this premise.

First, looking closely at use-rates per thousand for hospitals in 20 states covering approximately 50 percent of the nation’s population (listed in Note 1 below), inpatient utilization by Medicare-age patients declined significantly between 2006 and 2010, falling 8.3 percent for those aged 65 to 84 and 3.0 percent for those over age 85. Because their healthcare costs are largely covered by the Medicare program, individuals over age 65 would not be expected to forgo care due to recessionary stresses; other factors must be at play.

Second, healthcare utilization would be expected to decline as unemployment increases, meaning that as people lose jobs and employer-based insurance, their ability to access healthcare services normally declines. Unemployment rates have historically served as a good proxy for recessionary impact. During the recession in the 1980s, for example, unemployment surged from about 6 percent to nearly 11 percent. If unemployment rates were relatively moderate in certain states, but utilization in those states was declining more rapidly than in other states, it would stand to reason that fundamental causes other than recession-linked unemployment were creating the use-rate drops.


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