Health Care Spending: The Flattened Curve is Reversed

Health Care Finance Administrators for the past several years have reported that health care spending had leveled off.  During the fourth quarter of last year health care spending rose 5.6% reported by the Bureau of Economic Analysis last week.

The jump triggered a sharp upward revision in the government’s estimate of consumer spending overall and accounted for nearly a  quarter of the economy’s 2.6% annualizd growth in the last three months of 2013.

Despite the number of inpatient days dipping 1% during the fourth quarter hospital revenues increased 8 billion  (more than all the previous four quarters, combined). During this last period many unemployed went without health insurance and/or limited their spending during the recession and sluggish recovery.

The 2010 Affordable Care Act incentivized hospitals to become more efficient by decreasing readmissions, and shifting costs to patients through high-deductible plans and other measures, encouraging Americans to limit visits to doctors and hospitals.

For the time being those trends may be levelling off, however there are long term upward pressures on health care costs, such as the growth of expensive high tech treatments are re-emerging.  Many uninsured Americans delayed health care treatment until the Affordable Care Act was passed.  This demographic has bottled up demand and a pool of ‘disease’ awaiting treatment that will be treated in the next several years, which will inflate health care spending. It is very likely we will see a significant increase in health care spending as the result of the ACA. Although some new organizational changes have been designed to limit increases in health spending, the proposed and hoped for results are in doubt.

Insurers now are faced with setting rates for 2015.  The time period is very short with less than 4-6 months remaining until 2015 rates are set.  Insurers (Wellpoint) predict double digit increases in rates. The rates may be different in accordance with different rates of enrollment in each state.

In the next several years the acceptance of the ACA will hinge on consumer satisfaction, and true affordability in the daily budget of family finance. The statistical outline for subsidies may be ‘fantasy”. Premium rates may change, increasing in some states and decreasing in others. If there are large increases some Americans could be once again priced out of the marketplace. Fluctuations in personal income will shift subsidy amounts, from year to year.  Some may even involuntarily be penalized if their premium policy is too much.  The new mantra may be “Do I feed my family or be penalized by the ACA”.

While somwhat unclear is an IRS statement that penalties will be taken from a tax refund, and if the taxpayer has no refund they will not pay a penalty. And according to the way the wind is blowing politically the White House may make changes accordingly.  

Although some Democrats are waxing enthusiastic about the ‘numbers’ the ultimate success of the ACA is still open to question.  Only 26% of Americans give the ACA a favorable rating.