Bending the cost curve:
Obamacare’s Secret Success, by Paul Krugman, Commentary, NY Times: The law establishing Obamacare was officially titled the Patient Protection and Affordable Care Act. And the “affordable” bit wasn’t just about subsidizing premiums. It was also supposed to be about “bending the curve” — slowing the seemingly inexorable rise in health costs. ...
So, how’s it going? ... Has the curve been bent?
The answer, amazingly, is yes. In fact, the slowdown in health costs has been dramatic .... Since 2010, when the act was passed, real health spending per capita ... has risen less than a third as rapidly as its long-term average. Real spending per Medicare recipient hasn’t risen at all; real spending per Medicaid beneficiary has actually fallen slightly.
What could account for this good news? One obvious answer is the still-depressed economy, which might be causing people to forgo expensive medical care. But this explanation turns out to be problematic in multiple ways. ...
A better story focuses on what appears to be a decline in ... expensive new blockbuster drugs, even as existing drugs go off-patent and can be replaced with cheaper generic brands. ... But since drugs are only about 10 percent of health spending, it can only explain so much.
So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act’s reduction in Medicare “overpayments”... A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patients end up being readmitted soon after being released — an indicator of poor care — and readmission rates have, in fact, fallen substantially. Medicare is also encouraging ... “accountable care,” in which health organizations get rewarded for overall success in improving care while controlling costs.
Furthermore, there’s evidence that Medicare savings “spill over” to the rest of the health care system...
And the biggest savings may be yet to come. The Independent Payment Advisory Board, a panel with the power to impose cost-saving measures (subject to Congressional overrides) if Medicare spending grows above target, hasn’t yet been established, in part because of the near-certainty that any appointments to the board would be filibustered by Republicans yelling about “death panels.” Now that the filibuster has been reformed, the board can come into being.
The news on health costs is, in short, remarkably good..., health reform is starting to look like a bigger success than even its most ardent advocates expected.