Tuesday, January 07, 2014

Spinning like a top

Robert Pear at the New York Times offers a clear summary of a recent report by civil servants at the Medicare agency: "National health spending grew slowly for the fourth consecutive year, increasing 3.7 percent in 2012 to $2.8 trillion."

“The relatively low rates of growth that we’ve seen over the last four years are consistent with the historical trends that we’ve seen when we look at health spending and gross domestic product,” said Aaron C. Catlin, an economist and co-author of the report. “It’s consistent with what we’ve seen in post-recessionary periods in the past.” 

Nonetheless, the Administration was all too quick to jump in with its interpretation:

[T]he White House said the data vindicated President Obama’s health care policies. 

“The years 2009 to 2012 saw the slowest growth in U.S. health care expenditures since the government started collecting this information in the 1960s,” said Jeanne M. Lambrew, a health policy coordinator at the White House. 

“While there is a debate about how much the Affordable Care Act has contributed to this health cost slowdown,” Ms. Lambrew said, “there is no doubt that it reduced Medicare spending growth, and most experts believe that Medicare savings spill over into the private sector.” 

Most experts?  None that were quoted by this excellent reporter.  In fact, Medicare spending in 2012 grew faster than overall spending, at 4.8%.  Recall that the 3.7% total growth in spending includes the Medicare amount, so everything-but-Medicare grew at a rate well below Medicare. (Medicare represents about 20% of national health spending.)*

Oy. Why do they feel they have to claim credit? As noted:

Some provisions of the new health care law increased spending and others reduced it, but the overall effects on spending were modest, said Anne B. Martin, an economist who was the principal author of the report. She estimated that the law had increased national health spending by a cumulative total of one-tenth of 1 percent from 2010 through 2012. 

Read on:

Spending on hospitals and doctors increased at a faster rate in 2012 than 2011, while spending on prescription drugs and nursing homes grew more slowly. 

Hospital care increased 4.9 percent in 2012, compared to 3.5 percent in 2011. Spending for doctors’ services and outpatient clinics grew by 4.6 percent in 2012, up from 4.1 percent in 2011. 

"Spending for prescription drugs grew just four-tenths of 1 percent in 2012 compared to 2.5 percent in 2011." Why?  "Numerous brand-name blockbuster drugs — most notably Lipitor, Plavix and Singulair — lost patent protection in late 2011 and in 2012 and generic versions became available. Generic drugs accounted for 77 percent of all prescriptions filled in 2012, up from about 70 percent in 2011."

You just have to look at the chart above to understand that there are cycles in the rate of change of health care spending.  For an administration to claim credit for a dip in the rate is simply an exercise in over-reaching. It also makes that same administration responsible for any upward tick as the ACA goes into full swing.  I don't imagine we'll hear much from them on that at this time next year.

Speaking of next year, why does it take over a year to compile these figures?  Why are we looking at 2012 numbers?  The bills for 2013 will be paid by February.  Let's see if we can get these reports to be more current, so there is less tendency to "drive using the rear view mirror."

* Also, recall that Medicare spending has two components.  One is utilization, which is driven by demand.  The other is price, which is set administratively--irrespective of the actual costs of delivering services. It is important to know the relative weights of the two factors when looking at overall changes.


Brad F said...

On a related note to the post re: hospital spending.

Trends seem to indicate numbers of procedures, admissions, and FTE hires all down. No data I have seen examining inpatient trends over last few years show positive signs of life. Yet...

The CMS report gives us a 4.9% annual growth figure.

All prices?


Paul Levy said...

Good question. If prices, might it indicate that some of the market concentration/dominance plans of provider groups (aka "ACOs) are effective?

Barry Carol said...

The CBO reports Medicare spending monthly both on a raw basis and adjusted for year-to-year differences in the timing of payments. The numbers are net of offsetting receipts meaning beneficiary premiums and IRMAA surcharges on high income seniors primarily. For fiscal 2013, the CBO reported that spending for the full year adjusted for payment timing differences rose only 2.3% in nominal dollars despite an approximately 4% increase in enrollment.

For the fiscal years 2011, 2012, and 2013, Medicare spending net of offsetting receipts were $483 billion, $469 billion and $495 billion respectively. For the first two months of fiscal 2014, Medicare spending adjusted for timing differences in payments actually fell by 3%. To quote the first two lines from a song by the late 1960’s rock group, Buffalo Springfield, “There’s something happening here. What it is ain’t exactly clear.”

I’ll speculate that contributing factors might include hospital efforts to reduce infections and preventable readmissions, shared savings experiments, and maybe less futile care coupled with more use of hospice and palliative care at the end of life. Blockbuster drugs losing patent protection are also helping. I’m an optimist on this subject. I think we’re just getting started and there’s enormous room for further improvement.