Does ANYONE Really Know Projected Health Care Costs? Nope!

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Dr. Jaan Sidorov, host of Disease Management Care Blog
Dr. Jaan Sidorov, host of Disease Management Care Blog

According to the White House, the Affordable Care Act (ACA) is obviously responsible for the significant decrease in health care cost inflation over the last three years. The respected health economist Victor Fuchs, writing in the New England Journaldisagrees.  He points out:

1) There is a strong relationship between growth in the U.S. gross domestic product (GDP) and growth in health care spending: for the last 60 years, when one goes up, the other follows suit. While the prevalence of illness drives the consumption of health care, it turns out that the prevalence of illness plus a rising income is a stronger driver of health care consumption*.

It’s far more likely that the lackluster economy has been responsible for the low rate of inflation.

2) Two to three years is not enough time to gauge the impact of any single intervention on health care spending. In his NEJM article, Dr. Fuchs presents a graph showing the relationship between a two year period of spending and what follows over the next 20 years. It turns out it’s a very poor predictor.

So, even if the ACA could have an impact, it’s far too early to tell.

In the meantime, skeptics like Bob Laszewski, are pointing to richer mandated insurance benefits and are confidently predicting that health care costs are destined to increase.  Former CBO Director Douglas Holtz-Eakin worries young healthy adults won’t sign up, which could further fuel health insurance premium increases.

Who to believe? A partisan White House? Skeptics who want a return to market-based insurance? The DMCB’s solution is to believe Dr. Fuchs and confidently state it doesn’t know which way things are going to go.

*The only exception to the association between GDP and health care costs was during the mid-1990’s when managed care had its stranglehold on the delivery system


First Posted at Disease Management Care Blog on 5/28/2013

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Jaan Sidorov MD is the Host of the Disease Management Care Blog where he shares his knowledge and insights about medical home, disease management, population-based health care and managed care. He is a primary care internist and former Medical Director at Geisinger Health Plan with over 20 years experience in primary care, disease management and population-based care coordination. He is primary care by training, managed care by experience and population-based care strategies by disposition. The contents of his blog reflect only his opinions and should not be interpreted to have anything to do with any current or past employers, clients, customers, friends, acquaintances or enemies, personal, professional, foreign or domestic.

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