Health Care Spending Spikes: Why?

You may have read that health care spending in the private sector picked up both in the fourth quarter of 2013, and during the first two months of this year. Recent data from the Bureau of Economic Analysis (BEA) show that during the last three months of 2013 spending on health care rose at an annual rate of  5.3%  The trend continued this year, with spending climbing 6.2%, on a year-over-year basis in January, and 6.7% in February.

This came as a surprise. Since December of 2007, after adjusting for inflation, health care outlays have been rising by only 2.6%  As former CBO director Peter Orszag observed in a Bloomberg column published yesterday,  “the sudden jump has led some some commentators to declare an end to the era of slower health-cost increases, which has lasted for the past several years. ”  Yet, Orszag notes, “Medicare spending growth is still low, even through last month. Indeed, in the first half of this fiscal year, nominal Medicare spending was only 0.6 percent higher than in the corresponding period a year earlier.”

Why Have Outlays Risen for Those Under 65, But Not for Seniors?

BEA suggests that the jump during the first two months of this year reflects the fact that, thanks to the Affordable Care Act (ACA),  more Americans had comprehensive insurance that gave them access to a wide range of services.

Those who became insured in January and February are the folks who signed up at the very beginning of the enrollment period. No doubt many of them had been postponing needed care for a long time. As soon as they were covered, they began visiting doctors, scheduling elective surgeries, and filling prescriptions.

Going forward, won’t the fact that more Americans are insured mean that health care spending will continue to rise? Yesterday, the Congressional Budget Office (CBO) released a report that said “No.” The ACA will cost about $1 billion less than originally projected, the CBO reported, even though we will be covering more people. This is largely because premiums on the Exchanges turned out to be lower than expected.

Spending Spike at the End of 2013 May Well Be Temporary 

The uptick in January and February can be explained by pent-up demand but Americans began layout more for healthcare “well before January,” BEA points out. How does one explain the surge in private sector spending in the final quarter of 2013?

Some observers suggest that the spike in health-care spending that we saw during the last three months of 2013 may have reflected the panic that spread during the months before the ACA kicked in.. The Wall Street Journal’s  ”MarketWatch” puts it this way:  spending  may have risen in the fourth quarter as consumers and companies prepared for the official rollout of the law on January 1. It might not  last.”

This makes sense.

My guess is that many people who knew that their policies were going to be cancelled in January used that insurance during the final months of 2013 because they didn’t know: a) whether they would find new coverage in their Exchange and b) whether they would like it as well as their old policy.

Keep in mind that in the final quarter of 2013, the Exchanges were not working well. Those who needed to sign up for new coverage were anxious, and the media was stirring the pot by telling them that, in the Exchanges, out-of-pocket expenditures would be sky-high. If you were thinking about having a hip replacement, you might well decide to schedule it in October, rather than taking a chance that under your new Obamacare policy, you would have to pay down a $10,000 deductible before your insurer laid out a penny for the surgery. Many people who couldn’t get through on the Exchanges didn’t even know if they would find new coverage.

In fact average deductibles and co-pays in the Exchanges would turn out to be relatively lowOnly bronze plans come with high deductibles (averaging $5,081 a year). And just 19% of Exchange shoppers wound up with Bronze plans.

 Sixty-two percent picked silver, and the  average Silver plan calls for a deductible of  $2,905–40% lower than the average Bronze plan– and roughly $700 less than the typical deductible in the individual market pre-Obamacare.  Gold and platinum plans ask for even less cost-sharing. Many offer “zero-deductible” coverage. But in the fall of 2013, relatively few people knew the facts. They only knew what they heard on Fox. . 

Meanwhile Americans who had received cancellation notices were worried, not just about out-of-pocket expenses, but about losing their doctors.  Reform’s opponents were warning that insurers selling policies in the Exchanges had created “narrow networks” of providers. Americans who bought new insurance might not be able to continue seeing the specialists they trusted. They might not have access to a hospital that they knew.This would be another reason to scheduled more appointments and procedures in the final quarter of 2013, while you could still use your old policy.

This also helps explain why Medicare spending did not rise in the final quarter of 2013: Medicare beneficiaries had little reason to worry about losing their doctors in 2014.

Going forward we may see another blip in healthcare spending as the newly insured receive care that they had deferred. But most of those who were anxious to see a doctor enrolled in the Exchanges in October, November and December, and began getting care in January and February. Those who signed up for insurance in during the final surge of enrollments are more likely to be young and healthy. My guess is that spending will slow next month.

 

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How Much Will You Pay for Health Care in 2015? What You Need to Know About Healthcare Inflation-Part 1

 

Probably you have seen headlines like this one: “O-Care premiums to skyrocket.”

The warning, which was posted on The Hill, seemed designed to cheer conservatives distraught by Obamcare’s enrollment numbers. It began by announcing that next year, “premiums will double in some parts of the country. The sticker shock will likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.”

Where did the reporter get her information?  The story is based on interviews with “health insurance officials.”

Why would they issue such dire predictions? Perhaps they are trying to soften us up so that when insurance rates rise by “only” 7% to 10%, we’ll be surprised and grateful? (This is just a thought.)

The truth is that there is absolutely no reason to believe the same old, same old, fear-mongers who claim that in 2015, rates will spiral “by 200% to 300%.”

But what about those who predict double-digit hikes?  Wellpoint, the biggest commercial insurer in the Exchanges, recently told Bloomberg that it may ask for “double-digit plus” increases when it proposes 2015 rates sometime next month.

Wellpoint can propose whatever it wishes, but I very much doubt that state regulators would accept such stiff increases. A combination of regulation and competition will keep a lid on premiums both in the Exchanges, and off-Exchange, just as it did this year.

My guess is that, in most states, rates will rise by no more than 2% to 4%. Meanwhile, government subsidies will climb to cover those increases for most who buy policies inside the Exchanges. (This year 80% of shoppers who purchased insurance in the state marketplaces received tax credits to help with premiums.) Folks who purchase coverage off-Exchange won’t receive subsidies, but carriers selling policies to individuals outside the government’s online marketplaces will have to compete with prices inside the Exchanges.

Why am I so optimistic?

The Underlying Cost of Medical Care Is Slowing

Americans have become so accustomed to hearing about “runaway health care inflation” that most do not realize that we have finally “broken the curve” of rising health care costs.

Granted, for most of this century, rates soared: “From 2000 to 2009, health insurance  premiums climbed 84%,” Zeke Emanuel, a former White House healthcare adviser and author of Reinventing American Healthcare: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System., recently told NBC’s “Meet the Press.”

By contrast, “for the past three years, health care cost growth has dramatically slowed and is just about even with growth in the economy. Some of this is due to lingering effects of the recession in 2008,” he added. “But a part of it is undoubtedly due to the ACA.”

Drew Altman, president of the Kaiser Family Foundation, points out that, despite the aging of the population, ”the Congressional Budget Office projects that Medicare will cost significantly less in the future than previously thought,in part because of the ACA’s changes to Medicare’s payments. “  (As I have explained, those cuts do not reduce benefits, but they do force hospitals to cut waste and provide better value for our Medicare dollars.

Both in the public sector and in the private sector, “Overall health spending is growing at the slowest rate in 50 years,” Altman observes,  (dating back to when the government first started tabulating health expenditures.)”

“The key for the future is not to eradicate premium increases entirely,” Emanuel adds. The goal “is to make sure [that these increases] aren’t Excessive.”

He stresses that there is still much to be done to rein in healthcare spending. But for the moment “the exchanges are stable,” says Emanuel. “Premiums are likely to rise a little but not excessively.”

If you don’t believe Emanuel and Altman, take a look at the graph below, comparing outlays for all medical services (the orange line) to the PCE (personal consumption expenditures–the blue line) from 2009 to 2014. As you can see annual spending on healthcare services is now growing by well under 1% a year. (For a larger version of the graph, click on the link above.)

ifi0rzbQK9cU   bloomberg chart

Bloomberg News used the graph earlier this week, to illustrate a story that lays out some critical and little-known facts:

Prices “for medical services, which make up the biggest share of health care costs, have eased in the past two years. From February 2013 to February 2014 physician fees edged up just “0.2 percent–down from a 1.6 percent rise 2012,” Bloomberg reported, and “the cost of nursing home care rose by only 0.3 percent,” compared with “1.8 percent two years earlier.”

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How Many of Obamacare’s New Enrollees Were Uninsured Last Year? Why It Doesn’t Matter

Charles Gaba, the enrollment guru who has been tracking Obamacare sign-ups since October, now estimates that by April 15, some 17 million Americans will have purchased their own insurance policies either in the Obamacare Exchanges (8 million) or off-Exchange (9 million)

But how many of them were uninsured and how many were simply replacing policies that Obamacare had forced insurers to cancel?  This is the question conservatives ask.  After all they argue, if most of these folks already had coverage, we have just wasted a great deal of time and money moving them from a policy they chose to one that President Obama prefers.

There are two answers to their question. The first is that while we don’t have an exact number as to how many of the new enrollees were uninsured, we do know that, thanks to Obamcare,  the percent of Americans who are “going naked” has declined. New Gallup data shows that the uninsured rate fell from 18.1% in the third quarter of 2013 to 15.6% in the first quarter of 2014.

That said, Gaba offers a second, even better, answer: “It doesn’t really matter.” 

I agree. As he explains:

“It doesn’t matter because every one of those new policieswhether on-exchange or off-exchange; whether it went to someone who didn’t have insurance before, someone who had their old policy cancelled or went to someone who voluntarily made the switch to a new one…which  . . is a LOT of people, by the way…is still a fully ACA-compliant, full-coverage healthcare plan.”

Gaba points out that “the primary point” of his website (ACASignups.net) “is to track how many people are now enrolled in a “QHP certified” plan regardless of whether they had insurance before or not. Some moved from no plan at all to a QHP. Others moved from a ‘junk’ policy to a QHP (some have argued that there aren’t that many of these, but there were still a lot of them). Still others yet (myself included) have moved from a decent plan to a QHP. . . . The point is, they’re all ACA QHPs now.” [his emphasis]

This is critical to understanding the purpose of health care reform. From the beginning the goal of the Patient Protection and Affordable Care Act (PPACA) was not simply to insure the uninsured, but to protect the under-insured by making certain that everyone has comprehensive coverage.  Whether a carrier is peddling policies in a state marketplace or off-exchange all plans now must comply with the ACA’s rules by:

–covering the ten essential benefits

–offering free preventive care, and

–capping how much a patient can be asked to pay out-of-pocket.

In addition, carriers can no longer discriminate against customers suffering from pre-existing conditions by charging them exorbitant premiums, and they cannot set a limit on how much the insurer will pay out, over the course of a year or a lifetime.

The second goal of the Patient Protection and Affordable Care Act is to make sure that the price of such high quality insurance is not beyond reach. Government subsidies help low-income and median-income families, but the only way to make sure that everyone else can afford policies that meet the ACA’s high standards is by asking all of us to share in the cost.

This is why the ACA mandates that everyone purchase insurance. When more people pay into the risk pool, the costs decline for everyone. It is only then that universal coverage becomes possible

 

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Obamacare Enrollment, Including Medicaid, Heads for 14-20 Million

Revised: April 12

Charles Gaba, who has become the go-to-guru for Obamacare enrollment numbers, now predicts that by April 15, 7.09 to 9.75 million Americans will have purchased health insurance in the Exchanges. 

This is in line with the back-of-the-envelope estimate that he offered a week ago: “a nice round 8 million.”  (In parentheses, he suggested:  Perhaps a little higher (1M even?)., and then struck that thought.  “As always,” he noted, “I’ll be more than happy to be proven wrong, as long as I’ve undershot the mark.”

 

To that 7.09 to 9.75 million, he now adds 2.09 million who he is certain have bought comprehensive coverage outside the Exchange, plus an additional 5.7 million who, according to a Rand study published earlier this week, may have signed up  off-Exchange. Finally, Gaba estimates that 5.23 million to 7.29 million Americans have enrolled in Medicaid or CHIP. 

As of April 12, this brings the total number who will have insurance that meets the Affordable Care Acts (ACA’s) high standards to roughly 14 million to 20.2 million.

When Gaba first reported on the Rand report, he acknowledged that Rand’s numbers “were based on a survey” and “surveys include margins of error.”

Gaba has gained his reputation by being meticulous—and cautious. Typically, his estimates have been conservative. Given that track record, I suspect that by April 15, we will find that well over 14 million people have benefited from Obamacare. If pressed, I would guess 17 million.

At this point, you may be wondering: But don’t we need the new enrollees who are purchasing policies off-Exchange to join the state marketplaces in order to spread the cost of coverage among as many people as possible?

The answer is “No.”

A little-known provision in the ACA stipulates that if a carrier sells policies to individuals both in the state marketplace and in the private market, the insurer must view those customers as part of one risk pool, and price their policies accordingly. Together, they will  share the risk of becoming sick, while also sharing the cost of insurance that guarantees everyone access to care. All other things being equal, the larger the pool of people who buy coverage both on and off the Exchanges, the lower the risk– and the lower the cost for all of them.

“All other things being equal” includes whether the new people jumping into that pool are healthy. Recent evidence suggests that the new entrants are, in fact, younger, and as a result, more robust than those who signed up earlier.

In future posts, I’ll take a closer look at that pool, and explore how much you are likely to wind up paying for insurance next year.

 

 

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Obamacare Enrollment Hits 7 Million, Putting Downward Pressure on 2015 Premiums; Word-of-Mouth Spreads the Truth

(Updated March 31)

As the “train wreck” called Obamacare pulls into the station it’s becoming clear that some 7 million Americans are signing up to purchase insurance in the Exchanges. Ten days ago I went out on a limb and predicted that we would hit 7 million, if not by March 31, by early summer. Now it appears that we’ll break through that target by midnight.

Seven million was the Congressional Budget Office’s (CBO’s) initial estimate, but when the roll-out proved rocky, the administration lowered its expectations to 6 million. Reform’s opponents groused that this still was too optimistic, and before long the consensus estimate fell to 4 to 5 million. (Conservatives, who had helped lower the consensus, then accused Democrats of moving the goal-post to make it easier to claim success.) 

                             Younger Americans Join the Pool

Who are these last-minute shoppers? According to the Wall Street Journal,carriers are beginning to report that many are under 40.  Today, more insurers confirmed the trend. This should come as no surprise.

We always knew that people in their 50s and 60s would join the Exchanges first. Healthy 20-somethings and 30-somethings who rarely see a doctor would be in no rush to sign up. Why begin paying premiums before you have to? 

                                          Momentum Builds

Now, younger Americans are  jumping into the pool, and, most importantly, the pace of enrollments is building. Friday, March 28, Charles Gaba, the “numbers Geek” who has correctly predicted earlier enrollment milestones, wrote: “We’re in uncharted territory. . . Things are moving VERY quickly now, and events are quickly overtaking my ability to keep up.”  Yesterday (Saturday, March 29), Gaba hiked his March 31 estimate to 6.7 million, up from 6.22 million earlier in the week.

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Breaking News: As of Today Top Analyst Projects That Well Over 6 Million Will Enroll in Obamacare by March 31

 

Charles Gaba, the  health care guru who has become widely known as the “Nate Silver of Obamacare”. is now projecting that by March 31 6.22 million Americans will have signed up for insurance in the Exchanges. 

And that is what Gaba is projecting today.  I suspect that as we approach the deadline,  enrollments will snowball.

As young people who have signed up talk to those who haven’t, more and more 18-34 year olds will learn about the subsidies that not only  cut premiums, but slash deductibles.

Spread the word: the subsidies are so generous that roughly 6.5 million Americans will be able to buy $0 premium plans. That’s right—the insurance will cost nothing. Half of those 6.6 million will be under 39. 

.7 million anyone?

Keep in mind, after March 31 people can sign up if they experience a “life-changing” event: get married, have a baby, lose a job, get divorced.

A great many of them will be under 40. Young Americans will continue to sign up throughout the summer.

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Why Is It That So Many Reporters Seem to Know So Little about Obamacare? – Part 1

“Just because your voice reaches halfway around the world doesn’t mean you are wiser than when it reached only to the end of the bar.” 

~ Edward R. Murrow

­­­Long before the advent of the Internet,  Edward R. Murrow, the newsman who stood up and  exposed the lies spread by Senator Joe McCarthy in the early 1950s, understood that while “the speed of communication is wondrous to behold, it is also true that speed can multiply the distribution of information that we know to be untrue.”

Murrow was right. Today, as  traffic on the information highway has picked up speed, it often seems that, the Information Age that we celebrated in the 1990s has become an Age of Misinformation .

Today, not only CBS, the network that brought us Murrow, but the media as a whole seems to have forgotten his plea to his fellow journalists: “Just once in a while, let us exalt the importance of ideas and information.”

                              The Media and Obamacare

When it comes to covering the Affordable Care Act (ACA), not only televison networks but our major newspapers have fallen far short of Murrow’s fearless standards.  Instead of ideas and information, the mainstream media serves up opinions and anecdotes.

Tall tales about “Obamacare’s victims” have become standard fare. In recent months I have deconstructed two faux fables: one that appeared in the Ft. Worth -Star Telegram,(URL), another that aired on CBS stations nationwide.

Let me add, I am just one of many skeptics who have taken a close look at some of the “ginned-up stories” that, as the Los Angeles’ Times Michael Hiltzik puts it, “have led millions  to think that a program manifestly in their best interests is something bad.” 

HiltzikEric Stern, Erik WempleIgor Volsky,Paul WaldmanGlen Kessler,Tommy Christopher, and ColoradoPols.com   are among those who have done a superb job of fact-checking these “horror stories.”

Hiltzik detects a pattern: “What a lot of these stories have in common are, first of all, a subject largely unaware of his or her options under the ACA or unwilling to determine them; and, second, shockingly uninformed and incurious news reporters, including some big names in the business, who don’t bother to look into the facts of the cases they’re offering for public consumption.

In some cases, it is clear that writers, editors, pundits and producers are purposefully slanting the news.  Fox News comes to mind. But in many other cases, the problem seems to be sheer ignorance, combined with a striking lack of interest in the most important piece of legislation to have passed congress in roughly 45 years.
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Gun Control: Quote of the Week

Asked if he could outspend the National Rifle Association (NRA), former NYC Mayor Mike Bloomberg casually replied, “Oh sure.”

(Forbes estimates his net worth at $33 billion)

Bloomberg, who strongly supports gun control,  added  “I’m not the only funder of this.”

For decades, no one has been able to out-gun the NRA. I would love to see Bloomberg lead a group of benevolent billionaires (and millionaires) willing to take on this all-too-powerful organization.

 

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Are You Worried That We Won’t Have Enough Doctors to Care for Millions of New Patients?

Not long ago, I published a post on the theguardian headlined “Obamacare isn’t creating a doctor shortage, it’s solving it.”

It drew quite a bit of attention, and it occurs to me that many HealthBeat readers might well be interested in the subject. Just click on the title.

Let me suggest that you also pay attention to any legislation in your state that is designed to make better use of nurse-practitioners. .

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The Ukraine: What Ukranians Have to Say

The situation in the Ukraine is far more complicated than many realize.

Think Progress just published an excellent piece titled “Why Much of What You’ve Read About Ukraine isn’t Quite Right, As Explained by Ukranians.”

It begins: 

“Though protests had been raging in the capital city of Kyiv and cities across Ukraine since November, the eyes of the world turned sharply toward the former Soviet republic at the end of February when then-president Viktor Yanukovych fled to Russia and Russian president Vladimir Putin decided to directly insert himself in his neighbor’s internal turmoil. Citing an imminent danger to Russians living in the southern Ukrainian region of Crimea, Putin sought permission from Russia’s parliament to send military forces into Ukraine. As of Monday, Ukrainian officials said 16,000 Russian troops were in Ukraine and in a Tuesday press conference from his Moscow home, Putin said they “reserve the right to use all means to protect” Russian citizens in Ukraine, but denied having sent Russian forces there.

With all of the speculation regarding Russia’s motives and endless posturing over what’s in Ukraine’s best interest, the perspectives of those that matter most, actual Ukrainians, seem to get lost along the way. “The radical voices are always the loudest,” said Olga, a native of Sevastopol, Crimea who moved to the U.S. in 2007. “I wish there were some moderate voices in between that would be heard.”

When I was at Barron’s, I wrote about Russia and went there twice. I also have a friend who recently immigrated to the U.S. from the Ukraine. What I read in this post rings true.

You will find the rest of the post here: http://thinkprogress.org/world/2014/03/04/3356621/ukraine-russia-invasion/

 

 

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