QUALITY, NOT QUANTITY:

[A]fter years of slow cost growth, health care is reaching a crucial tipping point. In fiscal year 2014, inflation-adjusted Medicare spending per beneficiary actually declined compared with the previous year. Yet the next year or two will determine whether the recent era of slow cost growth becomes the new normal, or instead is reversed.

The consequences are enormous, for everything from the nation's debt to workers' take-home pay, and the risk of reverting back to faster cost growth is rising. While Medicare spending itself appears to remain subdued, spending outside Medicare may be going up, anecdotal evidence suggests. This isn't shocking: In commercial insurance, the weak economy played a big part in the slowdown, and as the economy picks up, we should expect Americans to spend more on health care.

The largest hospital system in the nation, for example, reports that admissions are ticking up. Employment growth in the sector has also risen, and that's a useful indicator because labor accounts for such a large part of health-care costs. In 2007 and again in 2008, health-care jobs increased by 2.7 percent. From 2009 to the first half of 2014, they grew just 1.7 percent per year. But in the past three months, the increase jumped back up to 2.8 percent.

Containing these pressures requires sending a strong signal to health-care executives that the era of fee-for-service payment really is over. After all, when we pay for quantity, that's what we get. And Medicare, the gorilla of health care, is the place to send that message; it's large enough to set norms throughout the sector.

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