Newtown, CT – August 30, 2013
Trends are down and we should rejoice, but let's not keep the eyes off the prize – According to a new CBO report, Medicare trends have decreased more than expected and the causes are not simply the aftermath of the Great Recession. Many others are asking the same question: Are we in a new "normal"? It's highly likely that we are, and a combination of factors continues to reshape the industry. First, there isn't much doubt that the recession dampened demand for health care services. And that was compounded by the growing numbers of patients in high deductible plans who were feeling the pinch from potential job loss, the continued pinch from stagnant salaries, and the sticker shock of ever higher prices. Second, a survey of employers by the NBCH shows that next year over 1 in 5 employers will only offer high deductible health plans, and as such the ranks of price-sensitive consumers will continue to swell. And they will increasingly demand price transparency, which in turn will continue to exert downward pressure on trends. Which is why another survey, one of physicians by ACPE on their desire to see Medicare release data in response to a federal judge's ruling, is important and informative. It shows that half continue to prefer opacity. Fortunately, it's only half, and that's good news…or should be unless CMS caves to the half living in the dark ages. That policy decision is all the more important because of the potential for continued price increases resulting from the consolidation of providers, as warns Harvard economists in the NEJM.
What this means to you – when all was said and done, the transformation of other industries yielded lower prices and better quality for all Americans, and we are starting to see the fruits of that same transformation in healthcare. But we have a long way to go. The bedrocks of such a transformation has to be pricing and quality transparency. Without it the potential abuses noted in the NEJM piece are likely to occur. But with millions of Americans turning into active shoppers, the pressure on providers to be competitive will overcome their tendency to seek out excess rents from the market. What this all means is that provider organizations will continue their transformation, and at an accelerated pace, if we maintain pressure. The cost trends will bend down, but only if we keep that prize in the front of our eyes.