Inflation Easing for Medical Care Costs, Experts Say

Published Oct 16, 2013. By Tony Leys. In Des Moines Register.

Medical care cost inflation has eased in recent years, but economists are unsure why, two national experts said in Des Moines on Tuesday.

“Something is happening, and they can’t explain it. The question is: Will it continue or not?” said William Hoagland, senior vice president of the Bipartisan Policy Center.

Hoagland, who spent years as a budget expert on the staff of U.S. Senate Republican leaders, said the prices of medical goods and services rose by just 1 percent last fiscal year, the lowest level in 50 years. He also noted that the rate of increase in Medicare spending per member dropped by nearly half in recent years.

Hoagland said he suspects the main reason is that more Americans are shopping for the best values in health care. Many consumers are facing higher deductibles on their insurance plans, meaning they have to pay for care from their own pockets until they meet an annual spending level. This arrangement piques their interest in how much goods and services cost, putting pressure on health care providers to be more efficient, he said.

Some analysts have speculated that the economic recession led many Americans to delay or avoid care, easing pressure on medical costs. However, Hoagland said studies show the recession provides only a partial explanation.

Hoagland was in Des Moines to speak at a conference the University of Iowa organized about the effects of the Affordable Care Act. In his speech and at a subsequent meeting with Des Moines Register writers and editors, he expressed doubts that the health reform law was the driver behind the easing of cost increases.

He said better coordination of care has helped, spurred on by payment methods that reward doctors and hospitals for keeping patients well instead of just giving them more treatment. Such arrangements are encouraged by the Affordable Care Act, but they probably would have come about anyway because of pressures from private insurance companies and employers, he said.

Robert Bixby, executive director of the Concord Coalition, who accompanied Hoagland to the Register meeting, agreed that the easing of health care inflation is unlikely due to changes being implemented by the Affordable Care Act.

Bixby’s group campaigns for solutions to the national debt. He said that even if the prices of goods and services continue to moderate, the country will face increases in health care spending as the population ages and millions more people qualify for Medicare.

Both experts said the Affordable Care Act is designed to have a roughly neutral effect on the federal budget, because new fees and taxes are to offset spending on such things as subsidies for coverage of poor and moderate-income Americans. But they said if Congress decides to pull many of the revenue sources without trimming the new benefits, the law could wind up increasing the deficit.