Slowing health care costs - the wrong way

The Health-Cost Slowdown Isn’t Just About the Economy

By David Leonhardt
The New York Times, December 5, 2014

It’s one of the most important economic questions today: Is the snail-like growth of health costs over the last several years a real trend, or is it merely a temporary part of the Great Recession’s aftermath?

The data experts who compile the government’s official numbers on health spending lean toward the more pessimistic view. They think the slowdown – to the lowest level of growth on record – stems in large part from Americans skimping on medical care during tough times.

In the aftermath of the 1990-91 recession and the slow recovery that followed, health spending stopped growing more quickly than the rest of the economy. It accounted for 13.4 percent of economic output in 1996, the same share as it had in 1993.

But the weak economy doesn’t seem to have been the main reason. The rise of health maintenance organizations (or H.M.O.'s) – along with other attempts by insurers to hold down costs – was.

Then a backlash against H.M.O.'s took hold, and health spending started growing rapidly again. The surge didn’t end until the last few years, when the efforts of the reformers began to have a widespread effect.

It’s simply not true that G.D.P. and health costs have historically moved in tandem. On the other hand, the experience of the 1990s demonstrates that a slowdown in health costs isn’t guaranteed to persist.

If patients start to rebel against some of the changes that have held down health costs – like narrow networks, which restrict which doctors they can see – spending may start to rise again. It also may start to rise if labor unions manage to undercut a tax on generous health plans or if Republicans succeed in stopping efforts to make Medicare more efficient. (Yes, that’s related to the infamous death-panel debate.)

The American health care system really is changing. What happens next will be one of the biggest economic stories of the coming decade.


By Don McCanne, MD 

There are several factors contributing to the slowdown in health care spending, but one of the most important is insurance innovation that is impairing affordability and access. These innovations include “consumer empowerment” measures, such as ever-higher deductibles, shift from co-payments to higher coinsurance, establishment of higher-cost tiers, and narrower provider networks that impair access.

The supporters of consumer-directed health care celebrate these “savings” that we are seeing, but this represents forgone health care - much of it beneficial health care. While some cite studies such as the RAND HIE and the Oregon natural experiment as showing no harm done, in fact, these studies were not powered to shown harm, but only to show a difference in spending.

People are doing without the care that they should have. Based on my clinical experiences, people really do suffer and die merely because they delayed care when they could not afford it.

Today, because of the transfer of health care costs to patients, being insured is no longer enough to prevent personal bankruptcy. It is not even enough to ensure that you will not die from causes for which intervention is effective.

There are far more effective ways to control health care spending, beginning with a single payer system. The recovered administrative waste alone would be more than enough to pay for care that patients are now avoiding due to our ill-advised and inhumane “skin in the game” policies.