Good guesses, but wrong

As an eventful decade for health care draws to a close, it's fun to think back a decade to all the fighting over what was going to happen to health care costs under the Affordable Care Act. I'm reminded of two bookends:

The buzzkill scenario put out by the Office of the Actuary at CMS in April 2010 ("Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended ") predicted health spending would be pushed up slightly relative to baseline and we'd be spending over $4.7 trillion on health care this year.

The rosiest in-the-tank-for-Obamacare scenario, put out in May 2010 in a joint Center for American Progress/Commonwealth Fund publication authored by the '08 Obama campaign's health advisor, predicted impressive savings relative to baseline ("The Impact of Health Reform on Health System Spending") that would help us keep health spending down to $4.3 trillion this year.

Funny now to look back at what happened next.

[table="width: 650, class: grid"]
[tr]
[td][/td]
[td]

Buzzkill scenario​

[/td]
[td]

Rosy scenario​

[/td]
[td]

What actually happened*​

[/td]
[/tr]
[tr]
[td]Avg annual health spending growth rate, 2010-19[/td]
[td][/td]
[td][/td]
[td][/td]
[/tr]
[tr]
[td]Cumulative health savings relative to baseline, 2010-19[/td]
[td]

-$311 billion​

[/td]
[td][/td]
[td][/td]
[/tr]
[tr]
[td]Total health spending in 2019[/td]
[td][/td]
[td][/td]
[td][/td]
[/tr]
[tr]
[td]Health spending as a percentage of GDP in 2019[/td]
[td][/td]
[td][/td]
[td][/td]
[/tr]
[/table]
*Estimated pending final data. Actuals for 2010-18 are: 4.3% average annual growth, $3.6 trillion in spending in 2018, and health care at 17.7% of GDP in 2018.

If you had predicted those actuals a decade ago, you would've been laughed out of the conversation. Health care cost grown slowed down well beyond what anyone was predicting back then.

Greenbeard said:

As an eventful decade for health care draws to a close, it's fun to think back a decade to all the fighting over what was going to happen to health care costs under the Affordable Care Act. I'm reminded of two bookends:

The buzzkill scenario put out by the Office of the Actuary at CMS in April 2010 ("Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended ") predicted health spending would be pushed up slightly relative to baseline and we'd be spending over $4.7 trillion on health care this year.

The rosiest in-the-tank-for-Obamacare scenario, put out in May 2010 in a joint Center for American Progress/Commonwealth Fund publication authored by the '08 Obama campaign's health advisor, predicted impressive savings relative to baseline ("The Impact of Health Reform on Health System Spending") that would help us keep health spending down to $4.3 trillion this year.

Funny now to look back at what happened next.

[table="width: 650, class: grid"]
[tr]
[td][/td]
[td]

Buzzkill scenario​

[/td]
[td]

Rosy scenario​

[/td]
[td]

What actually happened*​

[/td]
[/tr]
[tr]
[td]Avg annual health spending growth rate, 2010-19[/td]
[td]

6.6%​

[/td]
[td]

5.7%​

[/td]
[td]

4.4%​

[/td]
[/tr]
[tr]
[td]Cumulative health savings relative to baseline, 2010-19[/td]
[td]

-$311 billion​

[/td]
[td]

$590 billion​

[/td]
[td]

$2.7 trillion​

[/td]
[/tr]
[tr]
[td]Total health spending in 2019[/td]
[td]

$4.7 trillion​

[/td]
[td]

$4.3 trillion​

[/td]
[td]

$3.8 trillion​

[/td]
[/tr]
[tr]
[td]Health spending as a percentage of GDP in 2019[/td]
[td]

21.0%​

[/td]
[td]

Not projected​

[/td]
[td]

17.8%​

[/td]
[/tr]
[/table]
*Estimated pending final data. Actuals for 2010-18 are: 4.3% average annual growth, $3.6 trillion in spending in 2018, and health care at 17.7% of GDP in 2018.

If you had predicted those actuals a decade ago, you would've been laughed out of the conversation. Health care cost grown slowed down well beyond what anyone was predicting back then.

Click to expand...

Another Trump hater with fake news. If we can't deny those that need healthcare the most, we can't keep cost down by requiring they pay more or denying them coverage because they raise everybody else premiums. It is extremely expensive developing the drugs that remedy so much of human malady that to constrict payment to the pharmaceutical industry will not be enough support that development necessary for all of our health. Luckily, Trump is denying the free food those blood-sucking lower-earners get so that there will be more available in the money pool for the job/wealth creators to get and give, as we all know they do, to everybody that's willing to work for a living, and not yammer for free handouts, so they can more easily pay for healthcare. The socialist Democrats are always looking for how the govt can take away your right to have more choice of expensive stuff, like healthcare, for those that can afford it, simply to lower the cost for everybody. What a racket. If you don't have enough to pay for what you want, go out and EARN it. We should all sit-up straight to respect Trump when he appears, like the good people of North Korea do for Kim who tortured one of our own to death and Trump said Kim had nothing to do with it (and that our intelligence service was wrong to say otherwise), or bow to Him like is done for the Crown Prince in Saudi Arabia, who had a US resident and journalist chopped-up into pieces and denied it (and that our intelligence service was wrong to say otherwise). Same type of thing with Putin and Erdogan, blah-blah-blah.

To believe in Trump and the Trumpicans, you have to believe in lies. Get rid of the ACA. It's so much better to not have any doctor with Trump than that liar Obama who said wrongly you could keep whatever doctor you had.

Thanks for the post. Yet another statistic showing that Obamacare has worked better than expected.

Of course, now it's being actively dismantled by GOP and Trump without anything to replace it with... As Obamacare stats start to worsen thanks to this dismantling, who do you think GOP is going to blame?

Slavister said:

Thanks for the post. Yet another statistic showing that Obamacare has worked better than expected.

Of course, now it's being actively dismantled by GOP and Trump without anything to replace it with... As Obamacare stats start to worsen thanks to this dismantling, who do you think GOP is going to blame?

Click to expand...

It's really striking to look back at it now. Not just the actual way things have played out, but how little attention that reality has gotten.

The bookends I chose above were a sobering analysis from independent government actuaries and the optimistic predictions of ACA enthusiasts (predictions that, of course, were exceeded). Hacks on the right were obviously much more pessimistic at that time.

One example: the ACA famously called for ~$500 billion in Medicare savings relative to baseline over the 2010-19 period. It was a very common argument on the right ten years ago that these savings were illusory, couldn't actually be realized, would actually be offset by higher Medicare physician spending that wasn't being counted, etc. An example from June 2010:

Health Care Reform Is Likely To Widen Federal Budget Deficits, Not Reduce Them

Unachievable Savings

The first scenario removes spending cuts that we believe the Centers for Medicare and Medicaid Services (CMS) will ultimately be unable to implement. These are composed of cost reductions through Medicare market-basket updates, the Independent Payment Advisory Board, Medicare Advantage interactions, and the lower Part D premium subsidy for high-income beneficiaries.

Although the specifics of each differ, these provisions share two features. First, the act itself does not automatically reform Medicare in such a manner that will permit it to operate at lower budgetary cost. Accordingly, when the time comes to implement these savings, or those developed by the Independent Payment Advisory Board, the CMS will be faced with the possibility of strongly limited benefits, the inability to serve beneficiaries, or both. As a result, the cuts will be politically infeasible, as Congress is likely to continue regularly to override scheduled reductions.

A vivid example is the Medicare physician payment updates. Each year since 2002 the “sustainable growth rate” formula in current law has imposed cuts in payments to physicians under Medicare. 5 And each year, Congress has overridden these cuts.

Click to expand...

The argument here was that lowering cumulative Medicare spending over the 2010-19 period from $7.2 trillion down to $6.7 trillion, as called for in the ACA, was impossible. Actual Medicare spending over that period turned out to be $6.3 trillion. Far from being infeasible, the actual savings have come in at almost double what was projected. And I haven't heard a peep from the right.

You could do a similar exercise with Medicaid. Medicaid expansion was supposed to add $400 billion in new spending relative to the no-expansion baseline, pushing cumulative 2010-19 federal Medicaid spending from $3.3 trillion to $3.7 trillion (you can, of course, find Heritage articles from a decade ago confidently predicting the actual costs would be much higher than those projections). Actual Medicaid spending with expansion is coming in at just under $3.3 trillion.

These developments are really something. If you time traveled back to 2009/10 and brought these numbers with you, people on the left and right would've laughed you out of the room.

Slavister said:

Thanks for the post. Yet another statistic showing that Obamacare has worked better than expected.

Of course, now it's being actively dismantled by GOP and Trump without anything to replace it with... As Obamacare stats start to worsen thanks to this dismantling, who do you think GOP is going to blame?

Click to expand...

Going to blame? They HAVE been blaming!

There is a whole lot more to healthcare spending in the past decade than just ACA. A lot of changes made and in the run up to 2008/09 medical inflation was the highest ever and it wasn't going to continue at that clip forever regardless.

I would point that the largest issue that you can't really quantify is the building pressure in the healthcare sector. So much more is being demanded of a system while trimming so much fat that the pressure is building and the cracks have been forming for years. Financial pressure on hospitals, practices and services is reaching a breaking point. This is why you have record hospital closures and they are accelerating. Think about that for a minute. In a great economy, you have a record number of hospital closures. What happens in a recession? So many of these hospitals that used to run ~5% margins are now running -2 to 2% margins, again in good times. Sure, the major health systems with academic affiliations will survive, but the others? Not so much.

People are going to act surprised when suddenly we have 25% less hospitals in this country and 35% less beds while more and more of healthcare is delivered by mediocre "providers" who got their NP/PA degree online and can't do a workup to save their lives.

bave said:

There is a whole lot more to healthcare spending in the past decade than just ACA. A lot of changes made and in the run up to 2008/09 medical inflation was the highest ever and it wasn't going to continue at that clip forever regardless.

I would point that the largest issue that you can't really quantify is the building pressure in the healthcare sector. So much more is being demanded of a system while trimming so much fat that the pressure is building and the cracks have been forming for years. Financial pressure on hospitals, practices and services is reaching a breaking point. This is why you have record hospital closures and they are accelerating. Think about that for a minute. In a great economy, you have a record number of hospital closures. What happens in a recession? So many of these hospitals that used to run ~5% margins are now running -2 to 2% margins, again in good times. Sure, the major health systems with academic affiliations will survive, but the others? Not so much.

People are going to act surprised when suddenly we have 25% less hospitals in this country and 35% less beds while more and more of healthcare is delivered by mediocre "providers" who got their NP/PA degree online and can't do a workup to save their lives.

Click to expand...

I genuinely appreciate that you've expanded the discussion, and raise important issues about distribution of healthcare and closures of hospitals, but...

Some of your conclusions don't track. You are correct that "the building pressure in the healthcare sector" is a serious concern. What is missing from your argument is why they are feeling that pressure, why hospitals are closing (and where) and what we can do about that.

Here's what I've learned about hospitals and healthcare resources: Over the last decade and more, there has been a consolidation of hospitals and medical practices. As a result, many hospitals have closed to "cut costs" and improve profits. Profits? Yes, many of these closures are based upon for-profit entities squeezing profits from medical care. In other arenas, provision of care has been skewed toward more expensive procedures to "secure the finances" of hospitals and medical practices - at the expense of primary care and medically necessary procedures for non-private-insurance patients.

The American health care system for years has provided many hospitals with a clear playbook for turning a profit: Provide surgeries, scans and other well-reimbursed services to privately insured patients, whose plans pay higher prices than public programs like Medicare and Medicaid.

Click to expand...

Hospitals Knew How to Make Money. Then Coronavirus Happened. (NYT, Subscription).

The disruption to hospital operations may ultimately leave Americans with less access to medical care, according to financial analysts, health economists and policy experts. Struggling hospitals may close or shut down unprofitable departments. Some may decide to merge with nearby competitors or sell to larger hospital chains. “There is a huge threat to our capability to provide basic services,” Dr. Blumenthal said.

Hospitals are losing an estimated $50 billion a month now, according to the American Hospital Association. And 134,000 hospital employees were among the estimated 1.4 million health care workers who lost their jobs last month, data from the Bureau of Labor Statistics shows. Across the country, hospitals reported seeing between 40 and 70 percent fewer patients from late March through early May, many of them scheduled for profitable services like orthopedic surgery and radiological scans.

The decline affects large, elite hospital systems like the Mayo Clinic and Johns Hopkins — which estimates a loss of nearly $300 million into next year and has adopted cost reductions — as well as suburban hospitals and small rural facilities that were already financially stressed.

Click to expand...

NWRatCon said:

I genuinely appreciate that you've expanded the discussion, and raise important issues about distribution of healthcare and closures of hospitals, but...

Some of your conclusions don't track. You are correct that "the building pressure in the healthcare sector" is a serious concern. What is missing from your argument is why they are feeling that pressure, why hospitals are closing (and where) and what we can do about that.

Here's what I've learned about hospitals and healthcare resources: Over the last decade and more, there has been a consolidation of hospitals and medical practices. As a result, many hospitals have closed to "cut costs" and improve profits. Profits? Yes, many of these closures are based upon for-profit entities squeezing profits from medical care. In other arenas, provision of care has been skewed toward more expensive procedures to "secure the finances" of hospitals and medical practices - at the expense of primary care and medically necessary procedures for non-private-insurance patients. Hospitals Knew How to Make Money. Then Coronavirus Happened. (NYT, Subscription).

Click to expand...

Well except that its the result of decreasing patient reimbursement while having increased demand. He is exactly right on that. There has been much "trimming of the fat", and that consolidation and closures hasn;t just happened with for profit hospitals.

For the second year running, expenses have surpassed revenues for nonprofit and public hospitals, creating instability and further pressuring hospital margins, according to the fiscal 2017 sector medians from Moody's Investors Service.

Fueling the trend are lower reimbursement rates, shift to outpatient care, growing merger and acquisition activity, and rising ambulatory competition. The drop in expense rate was due largely to better control of labor and supply costs, Moody's said.

Click to expand...

Thanks Mr. Trump. repealing the individual mandate saved us trillions. #4MoreYears

Greenbeard said:

It's really striking to look back at it now. Not just the actual way things have played out, but how little attention that reality has gotten.

The bookends I chose above were a sobering analysis from independent government actuaries and the optimistic predictions of ACA enthusiasts (predictions that, of course, were exceeded). Hacks on the right were obviously much more pessimistic at that time.

One example: the ACA famously called for ~$500 billion in Medicare savings relative to baseline over the 2010-19 period. It was a very common argument on the right ten years ago that these savings were illusory, couldn't actually be realized, would actually be offset by higher Medicare physician spending that wasn't being counted, etc. An example from June 2010:

Health Care Reform Is Likely To Widen Federal Budget Deficits, Not Reduce Them


The argument here was that lowering cumulative Medicare spending over the 2010-19 period from $7.2 trillion down to $6.7 trillion, as called for in the ACA, was impossible. Actual Medicare spending over that period turned out to be $6.3 trillion. Far from being infeasible, the actual savings have come in at almost double what was projected. And I haven't heard a peep from the right.

You could do a similar exercise with Medicaid. Medicaid expansion was supposed to add $400 billion in new spending relative to the no-expansion baseline, pushing cumulative 2010-19 federal Medicaid spending from $3.3 trillion to $3.7 trillion (you can, of course, find Heritage articles from a decade ago confidently predicting the actual costs would be much higher than those projections). Actual Medicaid spending with expansion is coming in at just under $3.3 trillion.

These developments are really something. If you time traveled back to 2009/10 and brought these numbers with you, people on the left and right would've laughed you out of the room.

Click to expand...

Wow. That’s pretty substantial in terms of Medicare, which was expected to really be an uncontrollable cost bomb by now.

I wonder what Trump’s stupid mandate repeal has done to premiums?

NWRatCon said:

Here's what I've learned about hospitals and healthcare resources: Over the last decade and more, there has been a consolidation of hospitals and medical practices. As a result, many hospitals have closed to "cut costs" and improve profits. Profits? Yes, many of these closures are based upon for-profit entities squeezing profits from medical care. In other arenas, provision of care has been skewed toward more expensive procedures to "secure the finances" of hospitals and medical practices - at the expense of primary care and medically necessary procedures for non-private-insurance patients. Hospitals Knew How to Make Money. Then Coronavirus Happened. (NYT, Subscription).

Click to expand...

The reality is that hospital finance is a mess. There's huge inequality in margins, across service lines, across payer types, across hospitals. The industry as a whole looks strong: the nation funneled over a trillion dollars to hospitals in 2018 and all-payer hospital margins were 6.8%, near an all-time high. But underneath the surface you'll find many hospitals struggling to keep the doors open.

Consolidation into systems smooths some of that out--e.g., you could have a system with a flagship academic medical center that makes a substantial margin, propping up other community hospitals in the system that have negative margins. It becomes a game of picking the right service mix and setting up referral sources in the right service areas to try and get the right mix of insurance types among your patients, etc. Not to mention in some cases establishing enough market dominance or brand cachet to strong-arm commercial insures in rate negotiations. And on the more unsavory side, in some cases taking questionable steps to squelch competition.

But at the end of the day hospitals tend to be sclerotic institutions. They've got high fixed costs, they're not nimble, they're politically important and incumbents tend to be fairly insulated from disruption or challenges to their position.

Part of the dynamic over the past decade has been the move back toward holding provider systems accountable for some of the costs of the care they deliver. That puts pressure on systems to figure out ways to reorganize care delivery, and creates incentives to use lower acuity (cheaper) care settings and refer to lower-priced hospitals when possible. One of the many "squeezes" that have helped to slow health care cost growth beyond what anyone predicted a decade ago.

Greenbeard said:

The reality is that hospital finance is a mess. There's huge inequality in margins, across service lines, across payer types, across hospitals. The industry as a whole looks strong: the nation funneled over a trillion dollars to hospitals in 2018 and all-payer hospital margins were 6.8%, near an all-time high. But underneath the surface you'll find many hospitals struggling to keep the doors open.

Consolidation into systems smooths some of that out--e.g., you could have a system with a flagship academic medical center that makes a substantial margin, propping up other community hospitals in the system that have negative margins. It becomes a game of picking the right service mix and setting up referral sources in the right service areas to try and get the right mix of insurance types among your patients, etc. Not to mention in some cases establishing enough market dominance or brand cachet to strong-arm commercial insures in rate negotiations. And on the more unsavory side, in some cases taking questionable steps to squelch competition.

But at the end of the day hospitals tend to be sclerotic institutions. They've got high fixed costs, they're not nimble, they're politically important and incumbents tend to be fairly insulated from disruption or challenges to their position.

Part of the dynamic over the past decade has been the move back toward holding provider systems accountable for some of the costs of the care they deliver. That puts pressure on systems to figure out ways to reorganize care delivery, and creates incentives to use lower acuity (cheaper) care settings and refer to lower-priced hospitals when possible. One of the many "squeezes" that have helped to slow health care cost growth beyond what anyone predicted a decade ago.

Click to expand...

Well put analysis. The only caveat I would add.. is that some of the actions of hospitals for cheaper care.. will result in higher costs to society down the road. For example. the decrease in therapy and rehab utilization. It will likely result in higher long term care costs for medicaid and medicare.

Slavister said:

Thanks for the post. Yet another statistic showing that Obamacare has worked better than expected.

Of course, now it's being actively dismantled by GOP and Trump without anything to replace it with... As Obamacare stats start to worsen thanks to this dismantling, who do you think GOP is going to blame?

Click to expand...

The other day, Trump was boasting that he was a champion because he allowed the insurance industry to go back to issuing junk policies. Low premium, no real coverage.

The suckers who bought them, or took the job after having been promised “full coverage” only learn that they’ve been duped when they go. to the hospital.

Greenbeard said:

It's really striking to look back at it now. Not just the actual way things have played out, but how little attention that reality has gotten.

The bookends I chose above were a sobering analysis from independent government actuaries and the optimistic predictions of ACA enthusiasts (predictions that, of course, were exceeded). Hacks on the right were obviously much more pessimistic at that time.

One example: the ACA famously called for ~$500 billion in Medicare savings relative to baseline over the 2010-19 period. It was a very common argument on the right ten years ago that these savings were illusory, couldn't actually be realized, would actually be offset by higher Medicare physician spending that wasn't being counted, etc. An example from June 2010:

Health Care Reform Is Likely To Widen Federal Budget Deficits, Not Reduce Them


The argument here was that lowering cumulative Medicare spending over the 2010-19 period from $7.2 trillion down to $6.7 trillion, as called for in the ACA, was impossible. Actual Medicare spending over that period turned out to be $6.3 trillion. Far from being infeasible, the actual savings have come in at almost double what was projected. And I haven't heard a peep from the right.

You could do a similar exercise with Medicaid. Medicaid expansion was supposed to add $400 billion in new spending relative to the no-expansion baseline, pushing cumulative 2010-19 federal Medicaid spending from $3.3 trillion to $3.7 trillion (you can, of course, find Heritage articles from a decade ago confidently predicting the actual costs would be much higher than those projections). Actual Medicaid spending with expansion is coming in at just under $3.3 trillion.

These developments are really something. If you time traveled back to 2009/10 and brought these numbers with you, people on the left and right would've laughed you out of the room.

Click to expand...

I don't have time to digest this but something seems a little fishy. I'm guessing these so called savings were savings in PROJECTED Medicare and Medicaid costs. In other words, these programs cost more than they did 10 years ago but cost less than what the future projections were 10 years ago. That would make this an example of fuzzy math.