Healthcare Business News

Reform Update: Economists waiting for more numbers before dissecting ACA's impact on spending

By Melanie Evans
Posted: July 30, 2014 - 4:00 pm ET

Consumer health spending did not accelerate in April, May and June even as insurance coverage purchased through March under Obamacare went into effect, a preliminary federal estimate shows.

Economists, however, met the news with more skepticism than curiosity, perhaps because of dramatic revisions to first-quarter estimates. Final numbers for the quarter are not expected until late September. Until then, it's too soon to tell what may be happening to health spending, they say. Revisions could produce a significantly different story, namely more spending because of more people now having insurance.

Annualized spending by consumers for hospital care, clinic visits and other medical services increased 3% in the second quarter compared with the same three months in 2013, the U.S. Bureau of Economic Analysis reported Wednesday. That's roughly the same growth rate (3.2%) for the first three months of the year as in the first quarter last year. Figures are not adjusted for inflation.

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The flat growth could be puzzling in light of the national expansion of health insurance underway since January. Through June, the number of uninsured has dropped 22%, or roughly 8 million adults. Millions bought health plans sold through exchanges with many waiting until the last weeks and days to buy coverage, raising speculation that the newly insured would begin to seek out hospitals and doctors in the late spring and early summer.

Current estimates appear to suggest otherwise. But the bureau figures are preliminary and will be revised twice in coming months. And as revisions to the first quarter—from an initial guess of 10% growth to the final estimate of a 1.4% contraction—illustrates the figures can be significantly revised. Estimates were made more challenging this year by the harsh winter, which dampened overall consumer spending, and the difficult work of predicting how the newly insured will behave as novice healthcare consumers.

Economists reacted to Wednesday's figures with caution. “There is a lot of uncertainty,” said David Dranove, a health economist with Northwestern University. “We should adopt a wait-and-see attitude.” Larry Levitt, who helps lead the Kaiser Family Foundation's health reform and insurance program, went public with his skepticism on Twitter. “I could try to explain why health spending was flat in Q2,” he wrote. “But I think I'll save my brain cells for the revision.”

Charles Roehrig, an economist and director of the Altarum Institute's Center for Sustainable Health Spending, said he expects that revised estimates will show faster health spending growth. Overall economic growth, better weather and reports by health systems of newly insured patients suggest the latest estimate may be too low.

Health spending contributed 0.08 percentage point to the economy's welcome 4% annual rate growth in the second quarter.

The figures reflect spending by consumers for health services, but exclude other contributors to the nation's overall healthcare costs, such as pharmaceuticals, medical equipment, hospital capital investments and research.

After adjusting for inflation, annualized health spending increased by slightly more than 0.7% between the first two quarters of the year. Second-quarter annualized spending compared with the same three months in 2013 increased 1.5%.

More revisions …

Medicare's hospital trust fund gained four more years before it will go broke (2030) under a new projection delivered to Congress by the program's trustees. The Congressional Budget Office followed the trustee report with a summary of its recent revisions to projections for federal health spending growth. Things look brighter by the CBO's revised estimates too. Federal health spending will account for 8% of the economy by 2039. Four years ago, the CBO projected the figure would be 9.6%.

Now that you're insured, what does it cost to get through the door?

One-third of silver health plans sold through the exchanges require a deductible for primary care, a Robert Wood Johnson Foundation report notes. The median deductible is $2,267, according to the analysis of silver plans sold on state exchanges. Deductible requirements were also prevalent (39%) for specialist visits.

Follow Melanie Evans on Twitter: @MHmevans

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