Big Effing Deal: Health Reform Leads to Historic Low in National Health Expenditure Growth

obama-approved-health-reforThe most hardened critics of health reform on the Left - the "public option or bust" people - decried it for, of all things, not controlling costs enough. Never mind that the same people also had a total cow in one of the most obvious attempts to control costs in the new law, which is a limiting the value of employer sponsored plans that could be tax-exempt at a fairly high level. But I digress. That was of course not the only measure to reduce costs in the health reform law. There were plenty of others. But the question is, is any of it working? It turns out, yes.

For the first time in memory, according to the Center for Medicare and Medicaid Studies, the growth in national health expenditure (NHE) last year roughly equaled the rate of growth of the economy. GDP grew at 3.8%, and NHE at 3.9%. Now, it can certainly be argued that the slow growth of health spending is attributable to the lackluster economy, and in fact, the CMS report makes that case as well. Which is why it's important to note the balancing of the rate of growth of the economy with that of the rate of growth of the NHE.

But wait, you say. Can you conclusively prove that health reform was significantly responsible for this? Well, let's compare the projection released in 2010 (CMS then projected spending from 2009-2019) and those released just yesterday (projecting health spending from 2010-2011). From last year's report:
In 2010, NHE growth is expected to decelerate to 3.9 percent while GDP is anticipated to rebound to 4.0 percent growth. Much of the projected slowdown in NHE growth is attributable to a deceleration in Medicare spending growth (1.5 percent in 2010, from 8.1 percent in 2009) that is driven by a 21.3-percent reduction in Medicare physician payment rates called for under current law’s Sustainable Growth Rate (SGR) provisions. Under a scenario whereby physician payment rates are held at 2009 levels, total health spending is projected to grow 4.7 percent,
In other words, CMS projected that if Congress passed a "doc fix" holding physician reimbursement rates in Medicare to 2009 levels (as opposed to the "scheduled cut" that never actually happens given Congress' willingness to keep passing temporary fixes), health expenditures would grow at 4.7%. So did Congress pass a doc fix in 2010? Oh, yes. Several of them, in fact. And for about half the year, it raised Medicare reimbursement rates by 2.2% above 2009 levels.

As a matter of fact, looking at available data since 1960, it has never happened that the growth of national health expenditures have roughly balanced with the growth in GDP. One more time: this is unprecedented since at least 1960.

Quick recap: Under the scenario that played out with the doc fix, health expenditure was estimated to grow by more than 4.7% (more, since the reimbursement rates were actually higher in 2010 and CMS' projection only included rates at 2009 levels). But in actuality, NHE only grew by 3.9%. That's 17% lower than estimated. As you will notice, the GDP growth rate was almost the same as was estimated (4.0% estimated vs. 3.8% actual). This match is unprecedented in at least 50 years. So what was the intervening event? This:

And oh, by the way, the historic low in the growth in national health expenditures came even as Medicare expanded coverage. Yes, I know for many on the ideologue Left it is impossible to fathom, but President Obama has added to the benefits of Medicare recipients in the form of free preventive care, and collapsing and eventually closing the prescription drug donut hole while requiring a 50% discount for drugs in the donut hole while it is being collapsed.

Health expenditures do rise in 2014 far more than the estimated growth in GDP, but that is because the exchanges start, the subsidies kick in, and Medicaid gets massively expanded and covers everyone under 138% of poverty. In fact, by 2020, for about the same proportion of the GDP that is projected to be spent in health care expenditures anyway, 34 million more Americans will have health care coverage thanks to health reform. And for everyone who truly wanted an expansion of the public responsibility in health care (rather than just clamoring on the public option to rack up political points), this should be greatly welcome news:
Medicaid eligibility is set to increase to persons under age 65 in families with income up to 138 percent of the Federal Poverty Level in 2014. As a result, Medicaid enrollment is expected to increase by 19.5 million people and spending is projected to grow 20.3 percent. The new Health Insurance Exchanges are expected to cover 13.9 million people in 2014...
This is direct public health insurance for 20 million additional people in 2014, and another 14 million receiving federal subsidies to purchase health care. That is in addition to people who are already on Medicaid by qualifying under much tougher standards, and people who are enrolled in Medicare, SCHIP, or the Veterans Administration.

But even with this massive expansion of the role of the federal government in paying for health care coverage of those who need it, the total expenditure by the federal government as a proportion of the total national health expenditures actually shrinks, thanks to health reform. In last year's report, federal spending was on track to account for 52% of NHE by 2019; now it is on track to account for roughly 50% in 2020.

When Joe Biden said health reform was a big f*cking deal, he wasn't kidding, or exaggerating. This is how big a deal health reform is. We are talking a massive expansion of public responsibility for health care for everyone, 34 million additional people gaining coverage, Medicare strengthened, Medicaid massively expanded, and that expansion in coverage coming at almost no additional cost to the country's total health spending. Smart, cost-effective, and yes, progressive. Health reform rocks. And it's a big effing progressive deal.