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White House Economic Report Says Health Law Helps Slow Spending Growth

By Jane Norman, CQ HealthBeat Associate Editor

March 15, 2013 -- An economic report the White House issued Friday dived into one of health care policy’s hottest and knottiest recent debates: the slowdown in the growth of health care costs.

Policymakers differ on why the slowdown is occurring, but the Obama administration said in the report that it appears to be connected in part to sections of the 2010 health care law (PL 111-148, PL 111-152) that already have been implemented. Sections of the law “appear to be having positive effects” on care coordination, hospital outcomes and spending, said the report’s 23-page chapter on reducing costs and improving the quality of care.

In the future, changes in Medicare payment systems that better align payments with costs and provide incentives for efficiency through methods such as bundled payments “hold potential to improve care quality and reduce medical spending,” the report added.

Republicans and conservative analysts, however, have disagreed about whether the slowdown will continue and what the health care law’s contribution is to the trend. Douglas Holtz-Eakin, president of the right-leaning American Action Forum, told the Senate Finance Committee earlier this month that Medicare pilot programs to try out new ways of delivery and payment typically go nowhere . “The recent slowdown in national health care cost growth is something you can’t rely on,” Holtz-Eakin said, adding that it has happened before and likely will reverse once the health care law’s expanded coverage of the uninsured goes into effect.

In addition, GOP members of the House Energy and Commerce Committee earlier this month issued their own report that maintained the health care law isn’t working to control costs because individual health insurance premiums are projected to increase sharply in 2014.
The annual economic report issued by the president is written by Alan Krueger, the chairman of the Council of Economic Advisers. It presents the administration’s economic agenda and provides a look at the economic situation. Rising health care costs “could jeopardize our prosperity and security in the years ahead,” said its opening chapter.

“While the immediate budgetary concern in 2013 is the need to replace the sequester, it is also important to remain focused on the main driver of our long-term budget challenge: the cost of health care for an aging population,” the report said. By 2030, one in five Americans will be older than 65 and per capita medical costs are three times higher for that group than younger people.

The report pointed out that the rate of growth in nationwide per capita health spending has been on a downward trend since 2002 but has particularly slowed during the past three years. Since 2010, the rate of growth has been essentially the same as GDP per capita, says the report. That’s unusual because growth in health care spending has been outpacing overall economic growth for the past five decades.
Although some of the slowdown can be attributed to the recession, also responsible are structural changes in the health care system, spurred on in part by the health care law, said the report. The law is projected to increase the number of Americans with insurance by 14 million in 2014 and more as the years go on.

Specifically cited are reductions in excessive payments to Medicare Advantage plans, stronger antifraud efforts in Medicare and changes in the provider payment system, such as the formation of Accountable Care Organizations that will extend the life of the Medicare trust fund by an anticipated eight years, said the report. In addition, it cited the Hospital Value-Based Purchasing System that rewards hospitals for high quality care and reduces payments for poor performance; Medicare innovation center programs that seek to test better approaches; and expanded use of health information technology.

2013 Economic Report of the President (PDF)

Jane Norman can be reached at [email protected].

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