This month, the findings of a rigorous study of new data on healthcare spending in the U.S. private market hit healthcare policymakers and scholars with gale force. The main findings:
1. While U.S. cost control efforts, through the ACA and more generally, are focused mainly on reducing wasteful care, in the private market the price of care is the primary driver of spending differences within and between regions, and so of high overall costs (or, as Sarah Kliff put it three years ago, it's the prices, stupid).
2. Region by region, there's very little relationship between Medicare spending and private market spending. Many regions with low Medicare spending have high private market spending.
3. "Hospital prices are positively associated with indicators of hospital market power." The more concentrated the market, the higher the spending.
Points one and three have bene recognized to some extent for years -- though the new data is very valuable for boosting the growing attention to antitrust enforcement, which Hillary Clinton has promised to ramp up. Point two -- the lack of correlation between Medicare spending and private spending, -- is the surprise, and would seem to suggest a need to recenter cost control efforts to some degree, especially since out-of-pocket costs for the privately insured seem to keep rising relentlessly.
I'd like to highlight one point in the study's framing that may be obvious to healthcare professionals, but seems worth thinking about:
There are a couple of black boxes, or maybe gray boxes here: the percentage of out-of-pocket spending paid by holders of private vs public insurance, and the percentage of public expenditure in the "Other" column. Dividing those categories evenly between public and private yields a public-private spending split of 54-46.
That near-even split perhaps suggests that the main drivers of private and public spending growth -- prices and utilization -- are about equally important, and doubtless act on each other -- and need to be worked on with equal force and energy. One of the study's main points is that we can't assume that Medicare cost control will carry over to the private sector. That's a valuable point,, because two primary means of bending the cost curve are in tension: coordinated care versus competition.
The federal government's incentivizing of coordinated care is used by hospital executives to justify consolidation, which was already galloping apace when the ACA added its spur. The FTC has recently stepped up antitrust enforcement, moving to block three hospital mergers in recent months.
Is "coordination without consolidation" a workable mantra? As the effects of consolidation come into ever sharper focus, we may find out.
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* The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured, by Zach Cooper, Stuart Craig, Martin Gaynor and John Van Reenen,
1. While U.S. cost control efforts, through the ACA and more generally, are focused mainly on reducing wasteful care, in the private market the price of care is the primary driver of spending differences within and between regions, and so of high overall costs (or, as Sarah Kliff put it three years ago, it's the prices, stupid).
2. Region by region, there's very little relationship between Medicare spending and private market spending. Many regions with low Medicare spending have high private market spending.
3. "Hospital prices are positively associated with indicators of hospital market power." The more concentrated the market, the higher the spending.
Points one and three have bene recognized to some extent for years -- though the new data is very valuable for boosting the growing attention to antitrust enforcement, which Hillary Clinton has promised to ramp up. Point two -- the lack of correlation between Medicare spending and private spending, -- is the surprise, and would seem to suggest a need to recenter cost control efforts to some degree, especially since out-of-pocket costs for the privately insured seem to keep rising relentlessly.
I'd like to highlight one point in the study's framing that may be obvious to healthcare professionals, but seems worth thinking about:
Sixty percent of the population has private health insurance, which pays for a third of health care spending.Medicare and Medicaid together account for a bit more -- in 2014, 38.7% of healthcare consumption, versus 34.4% for private insurance. Here's the most recent spending breakdown from CMS, with percentages of total spending on consumption in 2014 added by me on the far right:
There are a couple of black boxes, or maybe gray boxes here: the percentage of out-of-pocket spending paid by holders of private vs public insurance, and the percentage of public expenditure in the "Other" column. Dividing those categories evenly between public and private yields a public-private spending split of 54-46.
That near-even split perhaps suggests that the main drivers of private and public spending growth -- prices and utilization -- are about equally important, and doubtless act on each other -- and need to be worked on with equal force and energy. One of the study's main points is that we can't assume that Medicare cost control will carry over to the private sector. That's a valuable point,, because two primary means of bending the cost curve are in tension: coordinated care versus competition.
The federal government's incentivizing of coordinated care is used by hospital executives to justify consolidation, which was already galloping apace when the ACA added its spur. The FTC has recently stepped up antitrust enforcement, moving to block three hospital mergers in recent months.
Is "coordination without consolidation" a workable mantra? As the effects of consolidation come into ever sharper focus, we may find out.
--
* The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured, by Zach Cooper, Stuart Craig, Martin Gaynor and John Van Reenen,
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