Obamacare seems to be Helping to Curtail Health Care Costs

July 8, 2013

Editor’s Note: This column previously appeared in Bridge Magazine.

In recent months, a conversation has burgeoned in health and public policy forums about the slowdown in the growth of health care spending. We are all asking the same questions: Is this slowdown real? Are some of the past cost containment efforts and recent provisions in the ACA beginning to take root?

In February 2013, Congressional Budget Office (CBO) director Douglas Elmendorf testified before Congress on the CBO’s budget outlook for 2013-2023. As reported in the New York Times and elsewhere, the health care outlook was remarkable: projected Medicare and Medicaid spending for 2020 was down 15 percent over projections made three years ago. Specifically, the CBO noted “net outlays for Medicare… grew by 3 percent… in 2012—a slower rate of growth than any recorded since 2000.” And, “the CBO’s current baseline also shows lower spending per person in the Medicaid program than was shown in August, primarily because of adjustments to account for the slowed growth in Medicaid spending… CBO has reduced its 10-year projections of outlays for Medicare by $137 billion…the third consecutive year in which spending was significantly lower than CBO had projected.”

In a February 2013 spending brief, the Altarum Institute noted that these trends were not limited only to Medicare and Medicaid, but could be seen in health care spending across the board. National health expenditures grew by only 4.3 percent in 2012, slightly higher than the past two years but much lower than historical trends.

But what do the trends in health spending look like for Michigan?

Information on total health expenditures at the state level is limited; CMS only has state-level spending data through 2009. But, these trends are consistent with what we are seeing at the federal level. Indeed, since 2000, health spending in Michigan has tracked along with—but somewhat below—the national average.

Data we have seen from Blue Cross Blue Shield of Michigan (BCBSM), the state’s largest private health insurer, also point to a slowing of health care cost increases in Michigan similar to what we are seeing nationally. And, we believe that these trends will continue, at least in the near term.

A June 2013 Health Affairs blog citing a PwC Health Research Institute projection suggested that the slowdown is the result of several factors. In addition to the influence of the recent recession, the blog cited the continuation of the movement to deliver care in lower-cost settings, reductions in hospital readmissions (and the associated costs of complications), and shifts in employer coverage toward greater use of high-deductible health plans.

In Michigan, providers, employers and health plans are all engaged in these activities. Michigan providers have been at the forefront of improving quality and efficiency through the Michigan Health & Hospital Association’s Keystone Center initiatives and the Blue Cross Blue Shield of Michigan Collaborative Quality Initiatives. Under the Centers for Medicare & Medicaid Services Innovation Center created by the Affordable Care Act, eight Michigan health systems are participating with Medicare as Accountable Care Organizations and Michigan is home to the largest Patient-Centered Medical Home demonstration project in the country—both efforts testing innovative health care payment and service delivery models. These efforts are all helping to slow the overall growth in health spending in the state.

Health care in America today is going through large-scale change: Both in how care is delivered and how it is financed. While only time will tell, we all have reason to be optimistic that the changes we are witnessing today are not one-time phenomena but the reflection of an important and favorable trend.