Healthcare Spending Expected to Fall Trillions Below Projections

According to Robert Wood Johnson’s report, the United States is on track to spend $2.6 trillion less on healthcare between 2014 and 2019.

The United States is on track to spend $2.6 trillion less on healthcare between 2014 and 2019 compared to initial projections made right after the 2010 passage of the Affordable Care Act, according to a new report from the Robert Wood Johnson Foundation.

That’s despite a recent spike in projected spending. Compared to 2014, the 2015 forecast from the Centers for Medicare and Medicaid Services includes a relatively modest increase in projected national health spending of $49 billion. But comparing the 2015 forecast to the 2010 ACA baseline forecast reveals dramatic declines in spending projections for the period between 2015 and 2019; national spending is expected to be $2.9 trillion lower than the ACA baseline projection for the same period.

Declines in projected spending on Medicare, Medicaid, private health insurance and other health spending are large as well. CMS predicted that total Medicare spending for 2014 to 2019 would be $455 billion lower than in the ACA baseline forecast, partially because of the Budget Control Act of 2011 — sequestration, in effect — which required Medicare payments for all types of services be reduced 2 percent beginning in April 2013. The report said that slower-than-expected spending growth from 2010 to 2014 was another contributing factor.

Over that same period, projected Medicaid spending dipped by just over $1 trillion. The report credits this partly to the 2012 Supreme Court decision that made the ACA Medicaid expansion optional for states, significantly reducing enrollment projections.

Private health insurance spending projections were lower by $664 billion, much of it driven by slower spending growth from 2010 to 2014 than had been previously expected. The report credits this slower growth to the sluggish economic recovery, as well as low prescription drug spending due to patent expirations and increases in generic drug prescribing. Another likely contributor, the report said, was a substantial shift toward higher deductibles and cost sharing in private plans, some of which may have been adopted in anticipation of the ACA excise tax on high-cost plans.

CMS does not attribute the low projections to the ACA, but researchers said the law may have contributed in a number of ways. The ACA payment adjustments that began in 2011 appear to have had a greater effect on healthcare utilization than anticipated; unexpected reductions occurred in Medicare hospital days, outpatient visits, skilled nursing facility days and advanced imaging. Additionally, lower payment rates in Medicare may have affected payment rates by other payers, with commercial insurers following Medicare in their negotiations with hospitals and physicians.

Accountable care organizations, medical homes and other delivery system reforms may also have played a role, the report said. If indeed they did, then researchers expect slower growth to persist beyond current projections. But if the economy was the prime driver of slower growth, then a return to faster growth would accompany a robust recovery, they said.

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Source: Healthcare Finance