Health Care’s Good News
By EZEKIEL J. EMANUEL
THINK about it. When was the last time you heard the phrases "good news" and "health care costs" in the same sentence?
I can't remember either.
Most of the recent talk about health care spending has been pretty bleak. Just take a look at the Rate Review Tool on Healthcare.gov and you'll know why. Major insurers are proposing painful, double-digit premium increases in 2013. In California, Anthem Blue Cross, Blue Shield of California and Aetna all announced rate increases of 20 percent or higher for some of their customers. Many are taking this as a sign that, despite its intentions, the health care reform law is failing and costs are going up as a result.
But there is something bigger going on here, though commentators may not be shouting about it. Health care spending is still going up, but the rate at which it grows year to year has actually been declining for about a decade now.
But there is something bigger going on here, though commentators may not be shouting about it. Health care spending is still going up, but the rate at which it grows year to year has actually been declining for about a decade now.
This is truly a sea change. Look at Medicare: over the last 43 years, costs per beneficiary grew 2.7 percent faster than the overall economy. That's why Medicare spending rose from $7.7 billion in 1970 (or 0.7 percent of gross domestic product) to $551 billion in 2012 (almost 4 percent of G.D.P.). But this trend has finally reversed; over the last three years, Medicare costs per person have grown 1.3 percent slower than growth in the overall economy. In January, a Department of Health and Human Services report showed that Medicare spending per beneficiary grew just 0.4 percent in 2012. And last week, the Congressional Budget Office lowered its 10-year Medicare spending projection by $137 billion, because "health care spending has grown much more slowly" than "historical rates would have indicated."
This slowdown is not limited to Medicare, nor is it simply the result of belt-tightening in the wake of the Great Recession. Since 2004 - nearly four years before the economic downturn - the rate of health care inflation per person has been just 0.8 percent higher than the growth of the G.D.P. Between 1965 and 1993, for comparison, it was 3.2 percent higher.
So if the growth of spending is decelerating, why are premiums increasing? First, the big increases were in relatively small parts of the market, among individual and small-business policies. Second, like everyone else in the health care industry, insurance companies are uncertain about the future, particularly about what will happen to their margins when the new exchanges open in October. The natural response to uncertainty is caution, and for insurance companies, the cautious approach is to increase revenue and profits as much as possible in the short term in case Obamacare lowers them in the long term.
But once the exchanges begin to facilitate competition, this fear should dissipate and premiums should come down.
Note: I often agree with some of what Emanuel says. Not this time. I've lived through too many "healthcare costs are falling" false alarms to take this one too seriously. Notably missing from his list of candidates for "more competitive bidding" (follow the link to see the full article) is the 900 pound gorilla, pharmaceuticals. I can't tell whether this article is a serious analysis of what's going on, or a cheerleading session for PPACA.
-SPC
Will young adults face ‘rate shock’ because of the health-care law?
By N.C. Aizenman,
Many young, healthy Americans could soon see a jump in their health-insurance costs, and insurance companies are saying: It’s not our fault.
The nation’s insurers are engaged in an all-out, last-ditch effort to shield themselves from blame for what they predict will be rate increases on new policies they must unveil this spring to comply with President Obama’s health-care law.
Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many currently provide. Also, their costs will increase because they will be barred from rejecting the sick, and they will no longer be allowed to charge older customers sharply higher premiums than younger ones.
Supporters of the law counter that concerns about price hikes are overstated, partly because federal subsidies will cushion the blow.
The insurers’ public relations blitz is being propelled by a growing cast of executives, lobbyists, conservative activists and state health officials. They increasingly use the same catchphrase — “rate shock” — to warn about the potential for price surges.
Aetna chief executive Mark T. Bertolini invoked the term at his company’s recent annual investor conference, cautioning that premiums for plans sold to individuals could rise as much as 50 percent on average and could more than double for particular groups such as the young and healthy.
The danger of “rate shock” has also become the favored weapon of conservative opponents of the law, repeated in a drumbeat of op-eds and policy papers in recent weeks.
The argument is a powerful one because the success of the law, which was the signature domestic accomplishment of Obama’s first term, depends on enough people signing up for insurance, particularly healthy people. The issue is surfacing as the most recent significant challenge in implementing the health-care overhaul.
Supporters of the law complain that the warnings amount to a smear attack by special interests and political partisans, akin to earlier claims that the law would allow bureaucrats to deny life-saving care to save money.
http://www.washingtonpost.com/national/health-science/will-young-adults-face-rate-shock-because-of-the-health-care-law/2013/02/15/1a12bbae-70a6-11e2-a050-b83a7b35c4b5_print.html
The Health Benefits That Cut Your Pay
By DAVID GOLDHILL
NOT long ago, a 23-year-old woman joined my company as an assistant in the advertising sales department at a starting salary of $35,000. Smart, ambitious and poised, she should have a promising future. Unfortunately, her earnings prospects are threatened. Like many Americans, she’s unaware of how much of her compensation is being eaten up by health care costs, and how much this share will grow as long as the increase in health costs exceeds growth in gross domestic product. That’s just math.
The Affordable Care Act does require employers, beginning this year, to note on W-2’s how much both the employee and the employer contributed to health care costs. Maybe that will help diminish the ignorance regarding true health care costs. But even with greater awareness, many Americans still might not understand that the largest effect of the cost of our health care system is to reduce the amount of money they actually take home.
I have estimated that our 23-year-old employee will bear at least $1.8 million in health care costs over her lifetime. That’s assuming that such costs don’t grow by more than current government estimates, that she never has a working spouse, and that she and her dependents don’t ever contract a serious illness.
Even after decades of financial engineering, including both the already-implemented and the planned aspects of the Affordable Care Act, the American health care system can be called successful mainly in its ability to hide its enormous cost.
My new employee thinks that she is paying roughly $2,600 for health care in her first year on the job — her $500 deductible plus her $2,100 share of the company’s health insurance premiums. In fact, she’s paying more than $10,000 into the country’s health care system. As her employer, our company will pay $6,190 of her health care costs, money that might otherwise go to her in salary. (From my point of view as a chief executive of a company, health care is just a different form of compensation.) She is also paying more than $1,500 in federal and state taxes to finance Medicare and Medicaid.
Clearly, personal health insurance is not the only way our employees pay into our health care system. There is the 1.45 percent of every paycheck that goes to Medicare, as well as the portion matched by the employer. Furthermore, a large slice of her general taxes are, in fact, health care costs: roughly 20 percent of federal spending and 10 percent of state spending support Medicare and Medicaid. She must pay for all of this.
Wendell Potter: Fixing Medicare: Start By Eliminating Drug Makers' Sweetheart Deal, Not Benefits
It's no surprise that American corporations spend billions of dollars each year on lobbying, trying to gain favorable treatment from legislators. What some may find a bit unnerving is the industry that's leading the pack in these efforts.http://pharmagossip.blogspot.com/2013/02/wendell-potter-fixing-medicare-start-by.html
You might think our nation's defense and aerospace companies, which have legions of hired guns on Capitol Hill, are the leaders. Or perhaps Big Oil, which is perpetually fighting with environmentalists and consequently needs friends in Washington to block what it considers onerous legislation or regulations.
In both cases, you'd be wrong. It's actually the pharmaceutical industry that spends the most each year to influence our lawmakers, forking over a total of $2.6 billion on lobbying activities from 1998 through 2012, according to OpenSecrets.org. To get some perspective on just how big that number is, consider that oil and gas companies and their trade associations spent $1.4 billion lobbying Congress over the same time frame while the defense and aerospace industry spent $662 million, a fourth of Big Pharma's total.
(Number two on the OpenSecrets list, by the way, was my old industry, insurance, which spent $1.8 billion. Although health insurers were among the biggest spenders, the list also includes property and casualty and auto insurers.)
The huge sum of money our nation's drug makers lavish on Congress each year begs the question, what are they seeking in return? Surely it has something to do with the fact that our nation's legislators turn a blind eye as pharmaceutical companies engage in predatory pricing practices while enjoying exclusive rights to manufacture drugs for 20 years or more. All at the same time that drug costs and drug price inflation are among of the main drivers of health care costs for individuals and families and threaten the fiscal health of our public health care programs.
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