Declining Trend? Look a little closer


By Thomas Emerick

First Posted at Cracking Health Costs on 5/14/2013

Tom Emerick, Host of Cracking Health Costs
Tom Emerick, Host of Cracking Health Costs

An Op/Ed in the WSJ describes how “American health-care spending appears to be slowing down.”  Of course much or most of the decline in trend is caused by the weak economic conditions today.

Some writers are saying this may be part of an underlying slowdown in health care spending in general.  We need to be a bit skeptical of that point of view for several reasons:

  • Trend always abates during periods of layoffs and downsizing. Why? Because such things impact older workers especially. A slight decline in the number of workers over 55 will cause a big but temporary decline in trend.  (Whenever I’ve heard a company report a sharp drop in trend caused by their new wellness program, an employee education initiative, or whatever, the first thing i ask is if they have had any ten percent staff reductions recently. Usually they either have or their numbers are too low to be credible.)
  • Such reports are usually measuring net trend not gross trend. Gross trend is trend before increases in deductibles, etc. True trend can be camouflaged if you’re raising deductibles and out of pocket maximums.
  • When ACA hits trend will surge in a way we have never seen before.

Beware of those who say the rate of growth in health care prices and spending may be permanently rebased.

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