Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Opinion
December 13, 2018 12:00 AM

Editorial: The Great Moderation in healthcare spending continues

Merrill Goozner
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Merrill Goozner

    Here's something to cheer this holiday season: Healthcare spending last year grew at its slowest rate since 2013. The Great Moderation in healthcare spending, which began early in this decade, continues.

    There was good news almost everywhere you looked in the latest report from CMS actuaries, which showed 3.9% growth, down from 4.8% the previous year. Prescription drug spending rose just 0.4%, a second straight year of below-average increases after drugmakers' price-gouging spree of 2014-15.

    Spending growth at physician offices and hospitals slowed to a rate slightly above the overall national average. Spending on nursing homes and other long-term-care facilities increased at half the national average.

    Even patients' out-of-pocket expenses posted just a 2.6% annual growth rate. Unfortunately, any increase can be tough to manage for patients with low and moderate incomes. It's no consolation to be told that your wages are finally rising after nearly a decade of economic recovery when most of that increase has to go to pay for growing out-of-pocket healthcare costs.

    There was one troubling signal in the report. In analyzing the factor that contributed the most to the overall increase, the actuaries noted that the share attributable to age and sex had remained constant while per capita use of services declined. Medical prices, on the other hand, ticked up.

    Providers should take note. If they don't, the antitrust authorities will. Raising prices to make up for lost volume is not a viable long-term strategy.

    Since I'm neck deep in the health economics weeds this week, it's worth examining what might account for that slower growth in service use, which economists call intensity. Hospital use, whether measured by per capita inpatient admissions or lengths of stay, continues its long-term decline.

    Physicians, an increasing share of whom now find themselves employed, are under intense pressure from payers and their systems to hold the line on unnecessary utilization. Campaigns by some professional societies (like “Choosing Wisely” from the American Board of Internal Medicine Foundation) may also be changing behavior.

    For decades, demographers and economists have predicted the gray tsunami of aging baby boomers would inevitably push healthcare spending over 20% of GDP. But a new paper from Harvard's Maryaline Catillon and David Cutler and Temple's Thomas Getzen, who reviewed healthcare spending and longevity over the past 200 years, highlights some recent trends suggesting the future may not be as bleak and hard to manage as predicted.

    They note spending as a share of GDP didn't take off until shortly after the advent of Medicare and Medicaid in 1965. At the time, the nation spent about three times as much on the elderly as it did on people under 65. Over the next 20 years, CMS spending soared and the ratio rose to more than 5-to-1.

    But during the next three decades, the difference gradually came down and, by 2012, was back at 3.3-to-1. Given that Medicare spending has grown more slowly than private insurance spending over the past half-decade, it's probably even narrower in the past five years.

    That increased spending wasn't for naught. Most of the gains in longevity in recent decades have come from extending the lives of the elderly, the paper noted, a contrast to increased longevity in the 20th century, which came largely from reducing premature deaths from infectious and heart diseases.

    Only half of recent gains can be attributed to medical interventions. But in a surprising finding, the cost of those interventions relative to their medical gains is actually coming down. The cost of extending life by one year fell by nearly 20% between the 1985-95 period and the 2005-10 period, the authors calculated.

    An explosion in pricey new drug therapies for marginal gains in longevity could reverse that trend. But the good news, the paper suggests, is that price-gouging is a political choice—not one made inevitable by an aging society.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    DSC06216.jpg
    Cityblock Health cuts 12% of staff
    Nominations open for Modern Healthcare's Top Diversity Leaders awards
    Nominations open for Modern Healthcare's Top Diversity Leaders awards
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing