National Health Expenditures Reach Historic Low

Today, the CMS Office of the Actuary released its report on how much the United States spends on health care now and in the future. The report shows a 3.9 percent growth in health spending in 2010 – an historic low. Overall Medicare cost growth dropped from 7.9 to 4.5 percent between 2009 and 2010.  This slow-down occurred at the same time that many seniors with Medicare received cheaper prescription drugs. According to the report, private health spending has and will continue to be low in the next few years.  And the report estimates that private benefit spending growth per enrollee will be 3 percent this year, rather than 4.7 percent thanks in part to the Affordable Care Act’s policy that allows young adults to stay on their parent’s plan.

The report concludes that:

Average annual growth in national health spending is expected to be 0.1 percentage point higher (5.8 percent) under current law compared to projected average growth prior to the passage of the Affordable Care Act (5.7 percent) for 2010 through 2020. Simultaneously, by 2020, thirty million Americans are expected to gain health insurance coverage as a result of the Affordable Care Act.

The bottom line from the report is clear: more Americans will get coverage and save money and health expenditure growth will remain virtually the same.  But the report doesn’t tell the whole story.

The Affordable Care Act creates changes to the health care system that typically don’t show up on an accounting table. We know these new provisions will save money for the health care system, even if today’s report doesn’t credit these strategies with reducing costs. These provisions include:

• The Administration’s Partnership for Patients: Better Care, Lower Costs, a new private-publicpartnership to achieve two goals: reduce preventable hospital-acquired conditions by 40 percent and reduce hospital readmissions by 20 percent between 2010 and 2013.  Over 2,000 hospitals as well as employers, physicians, nurses, and patient advocates have committed to these goals which, over the next ten years, could reduce costs to Medicare by about $50 billion and help put our nation on the path toward a more sustainable health care system.
• Support for voluntary Accountable Care Organizations that make it easier for health care providers to work together to coordinate care for an individual patient across care settings – including doctor’s offices, hospitals, and long-term care facilities. The Affordable Care Act rewards ACOs that lower health care costs while providing high quality care, and could generate as much as $960 million in Medicare savings over three years.
• Bundled payment programs that will reward doctors and hospitals for working together to provide higher quality care to patients rather than bill for each individual procedure or test.
• Demonstrations launched by the new Innovation Center that will build and test models that will save money for both Medicare and the private sector, and then expand the use of the models that work.
• Important investments in programs that save money over the long-term like prevention and wellness programs.

Americans know that these common-sense strategies will reduce health care costs. Preventing disease and illness before it happens can keep people out of the hospital or the doctor’s office in the first place. Making health care more efficient improves the quality of care and saves money. And investing in new innovations can help generate new ideas and new delivery system reforms that reduce costs. Further, these provisions of the law represent ideas that hospitals, doctors, and employers all over America have been putting into practice for years, where they’ve been able to increase the quality of health care and reduce costs. 

We are confident that these reforms – in addition to those in the law – will help make our health care system more efficient, provide better health care to millions of Americans, and bring down health care costs for all of us.

Nancy-Ann DeParle is White House Deputy Chief of Staff