Newtown, CT – April 26, 2013
There's something afoot, which many seem to deny. It's the type of popular revolution that always catches us by surprise – Economists are arguing that the current slowdown in medical costs is simply an artifice of the Great Recession, and that costs are bound to get back up to historical levels. All the deficit reduction plans have spending caps in place, triggering cuts and adjustments if trend rates are too high; and yet CBO projects that none would be applied for at least another decade. I find today's discussion as surreal as yesterday's. For the past two decades pundits of various flavors have argued that health care cost increases were unsustainable, that the system would collapse on itself and ruin the country, yet costs kept going up. It has, however, proved to be unsustainable, but in a different manner than thought. Because it's not really the percentage of the economy devoted to health care that has broken the federal bank, it's its unanticipated effect through benefit buy downs and premium increases on working families. Those have broken the backs of average Americans. As Congress dithered yearly on applying the SGR, as Medicare continued to fuel overproduction of services through fee-for-service, as the RUC exerted its nefarious influence on fee schedules, as providers and plans colluded to hide massive price increases, employers left footing a higher and higher cost of providing health insurance exercised the only option left to them: shift costs to the insured. And now the insured, the average working family, is mad, really really mad. So today's discussion that a return to medical cost inflation of CPI x 2.5 is inevitable ignores one important variable: consumers won't pay for it (because they can't) and heads will roll.
What this means to you – The money has to come from somewhere, and we've shown that it has come from the salaries of working families. That can't continue or the number of families filing for bankruptcy will skyrocket, leading to massive impoverishment and a continued slow pace of recovery, if at all. The promise of premium relief through Exchanges is just that, a promise. Recent figures indicate that the premiums for the Exchange-offered products will be significantly higher (without the subsidy) than what's on the market today. ACA-led ACO payment reform activities are consolidating the provider market at a greater pace than ever, and our friends at CPR will show the effects of such consolidation in a forthcoming meeting. The upshot is higher pricing, which leads to higher premiums. We are therefore set for an explosion, and this one, like all the ones that have finally led to significant social and economic change, will be fueled by engaged citizens. The medical-industrial complex is hoping for a return to "normal" rates of growth, and economists concur. We beg to differ. The grinding sound they're hearing aren't the inflation gears getting back in rhythm, it's the axes getting sharpened.
Francois de Brantes
Health Care Incentives Improvement Institute, Inc.