Tuesday, August 20, 2013

The Remarkable Slowdown In Health Care Costs Since The Passage Of Obamacare

A new survey of health care premiums for employer-sponsored health care coverage shows that health care inflation is slowing, further undermining critics’ predictions that costs would skyrocket in the aftermath of the Affordable Care Act.

The report, conducted by the Kaiser Family Foundation, estimates that the average annual premium in 2013 is $16,351 for family coverage — an average increase of 4 percent from last year. The rate is the latest indication that growth in health care costs is abetting, though premiums are still increasing faster than workers’ wages (1.8 percent from 2012 to 2013) and general inflation (1.1 percent from 2012 to 2013). Employees are now contributing $4,565 on average toward the cost of their coverage.

“We are in a prolonged period of moderation in premiums, which should create some breathing room for the private sector to try to reduce costs without cutting back benefits for workers,” Kaiser President and CEO Drew Altman, Ph.D., said.

What’s behind the cost slowdown is a much harder question to answer. Economists argue that the lackluster economic recovery is leading Americans to seek out less health care services and point to the trend of employers keeping premiums lower by shifting costs into higher deductibles and co-pays. But certain structural changes in the health care system may also be at play, including the “less rapid development of new medical care treatments,” greater reliance on generic drugs and more efficient provider practices.

The Affordable Care Act will further encourage these reforms. In fact, a ThinkProgress analysis of the Kaiser data found that the rate of growth has slowed since the law’s passage in March of 2010, though it is impossible to directly attribute the cost trend to the new law. From 2002 to 2010, family premiums for employer health coverage increased by almost 8.2 percent per year on average. Since 2011, they rose 5.6 percent per year.

Other reports have also uncovered a slowdown in cost increases. The number of double-digit rate increases requested by health insurers in the individual market has plummeted over the past four years and Medicare’s projected spending between 2010 and 2020 had dropped by over $500 billion. Under the new cost scenario, the entitlement program would, by 2085, make up 4 percent of the economy instead of the previously projected 7 percent.

Annual growth of medical spending has also slowed “from a high of about 8.8 percent in 2003 to an average of about 3 percent per capita from 2009 to 2011, according to data reported in January by the U.S. Centers for Medicare and Medicaid Services.”

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