January 06, 2015
Checks and Balances: Trends in Healthcare Spending

A look at recent headlines regarding healthcare costs shows a mix of good and bad news. Here are 4 key trends that provide insight into the current state of healthcare spending and what this might mean for healthcare organizations.

1. Overall healthcare spending is projected to increase modestly

The number of uninsured Americans is expected to decrease by nearly 50% over the next 10 years, which means that the Centers for Medicare and Medicaid Services (CMS) are projecting a rise in healthcare expenditures. However, costs are projected to increase at a slower rate than in previous years, remaining under 6% through 2023, compared with annual spending rises of an average 7.2% annually from 1990–2008 — 2 percentage points faster than the average gross domestic product (GDP) for that timespan. In addition, the rise in spending is expected to take up larger proportions of federal, state and local budgets. The 2014 growth in spending is expected to be approximately 5.6%, although out-of-pocket spending will have fallen by 0.2%.

However, per-capita Medicare spending is on the decrease

Although the burden of the overall healthcare spending is expected to shift slightly to federal and state government budgets, Medicare spending actually slowed, from 4.8% in 2012 to 3.3% in 2013.This means that Medicare expenditures — spending growth for which has traditionally outstripped GDP — are falling on a per-person basis. What’s more, the Congressional Budget Office forecasts that this “negative cost growth” will be sustained through 2020.

In the private payor arena, clarity on costs is hard to come by

Although overall numbers can be estimated and projected in large-scale terms, individual consumers may have a tough time finding out what their healthcare costs, or understanding what their options are when it comes to getting the most cost-effective healthcare for themselves and their families. In Miami, averaged payments “obscure details that would allow the county to truly understand and manage its labor healthcare costs.” Even where information is widely available, the value of pricing disclosures has yet to be determined. In New Hampshire, some experts are pushing for consumer incentives in addition to transparency. This is because, as one reporter in Massachusetts learned, that sifting through the pricing data requires time, effort, and access, all of which create barriers.

As a result, cost-transparency efforts need to be improved 

Because of the lack of usable data and the variance in how cost and spending data — of usable quality or not — are reported, the Government Accountability Office (GAO) is calling on CMS to “take steps to improve the information in its transparency tools and develop procedures and metrics to ensure that tools address consumers’ needs.” The GAO recommendations call for better estimates of out-of-pocket costs for Medicare beneficiaries; better-organized quality data that let consumers choose providers based on performance; the availability of more-relevant content; and more promotion of CMS’s and others’ transparency tools to the public.

“Transparency tools are most effective if they provide information relevant to consumers and convey information in a way that consumers can readily understand,” writes the GAO. “The information that is most relevant to consumers relates directly to their personal circumstances, such as information on specific procedures they are considering, and allows them to make meaningful distinctions among providers based on their performance.”