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Is healthcare spending heading in the right direction?

The reported low growth of healthcare spending in 2012 has become the source of debate for industry experts as to its cause, according to an article in The New England Journal of Medicine. The national debate centers on whether this recent slowing is an aftereffect of recent economic downturn or a sign of things to come.

A team of authors led by former National Coordinator for Health Information Technology and current President of The Commonwealth Fund David Blumenthal, MD, MPP, reveals that historically real healthcare spending has increased on average by 2.3 percentage points more than real gross product (GDP) since 1960 — that is, until the former posted a growth of less than percent in 2012.

According to the authors, what is more important that predicting what future healthcare costs will be is the effect they will have on the access to and availability of services should they reassume their former levels. “For the public sector, the likely effect would be the reductions in support of other programs (e.g., education, housing, transportation). “At every level of government, health care costs would pose a crushing burden,” they write.

The private sector, Blumenthal et al., would also the exhibit signs of strain, which could in turn negatively impact federal spending as a result of the Affordable Care Act (ACA):

Private insurance coverage decreases as the costs of health insurance increase. This would probably continue, with more and more Americans seeking subsidized coverage in health insurance exchanges under the ACA as employers drop coverage. Not only would this increase federal spending (and thus potential deficits), but it would also cut into wage gains for all employees. Wage increases for middle-class workers are inversely related to the cost of health and other benefits.

So what can be done to contain healthcare costs? The authors of the article see things playing out one of two ways.

“The first is tantamount to rationing services: reducing insurance benefits, increasing cost sharing by users of care, restricting eligibility for programs, and cutting payments to providers,” they explain. “Public and private actors have used all these approaches in recent years, and they will be tempted to deploy them with ever greater vigor.”

The second entails targeting inefficiencies in the health service cycle, a “reengineering approach” is beginning to emerge in the form of accountable care organizations (ACOs) and fee-for-performance initiatives as well as garner support among influential stakeholders.

The increasing consensus concerning these approaches to reengineering health care in the United States, the awareness of savings opportunities, and the threat of resumed growth in health care spending provide an opening for constructive, systemic reform that avoids the pain associated with health care rationing. Regardless of whether per capita expenses resume their pre-recession rates of escalation, these opportunities are likely to stay on the private and public health care agenda for the foreseeable future.

While the first strategy fits the mold of a worst-case scenario, the early returns from the latter appear to be showing promise and momentum to match, the authors conclude.

Read the full article here.

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