July 6, 2012


Why Health-Spending Trend Matters (David Wessel, 7/06/12, WSJ)

Americans made about 160 million doctors visits per quarter in the mid-2000s, but around 2009 they cut back to around 140 million, and, at least through 2011, haven't gone back to the old level, Kaiser and IMS Institute for Healthcare Infomatics estimate. Citigroup Global Markets surveys find year-over-year declines in hospital admissions for nearly every quarter since the beginning of 2008. The Congressional Budget Office has been scaling back Medicare projections because spending has been lower than it anticipated.

The big question now: Will spending on health bounce back when the U.S. economy does or is this change longer lasting?

Adjusted for inflation, U.S. per-person spending on health care grew at an annual average rate of 2.1% between 2005 and 2010 compared with 4.3% in the five previous years and 3.2% in the five years before that. Government actuaries predict that spending will grow slowly for another couple of years, and then bounce back. Over the next five years, they see per-person spending climbing 3.3% a year, driven in part by the expansion of coverage under Mr. Obama's Affordable Care Act. But they're basically making educated guess. The health system has so many moving parts that accurate predictions are impossible. Take prescription-drug spending. It's below projections because so many brand-name drugs are going off patent, which means patients are using cheaper generics, while pharmaceutical firms haven't found many new blockbusters. In March, CBO shaved $100 billion over 10 years for its Medicare prescription-drug spending estimate.

Because so much of health care is just consumer goods and so little is medically necessary it will respond predictably to applied economic pressures.  The trick is to build those pressures into the reform of Obamacare.

Posted by at July 6, 2012 5:26 AM

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