Overall Healthcare Spending Only Slated to Rise 7.5%

---Anna Shepherd, Health & Personal Finance Professional - Cambria Health Advisory Professionals


The following is an interesting press release of a recent research effort by the Health Research Institute of Price Waterhouse Cooper. It predicts 2013 healthcare spending based on recent trends and finds interestingly enough that overall spending is only slated to rise 7.5%. (Still above the posted rate for inflation, but not as bad as some had predicted.)  http://www.marketwatch.com/story/historically-low-growth-in-healthcare-spending-expected-in-2013-projects-pwc-health-research-institute-2012-05-31

The reasons for this slowed growth are quite heartening for the cause of business like Cambria Health Advisory Professionals, which holds as its mission the right of the individual to make his own health care decisions.  PWC’s article cites that in recent years, employers and industry professionals have made sincere efforts to reduce their own cost burdens; examples include such strategies as employees shouldering more of their medical costs, blockbuster drugs coming off patent, cost transparency, and employee participation in employer-sponsored wellness programs. Combined, this means that lowered costs could potentially be sustainable.

We continue to experience upward cost pressures stemming from the need for increased hiring and more sophisticated technology. With the baby-boom generation seeking retirement and getting ever-older, the healthcare industry is going to necessarily experience continued growth in costs due to greater utilization; the key will be assuring that resources are properly allocated (“not wasted”) to avoid negative impacts on the overall economy.

Certainly, Americans are demonstrating their interest in taking control over these decisions. For example, average enrollment in high deductible plans coupled with a Health Reimbursement Account has increased to 43.2 percent in 2012 from 34.2 percent in 2010.

The information showcased in this article represents, in my opinion, a great success for the free-market and individual decision-making. It legitimates a RAND study from the 1980’s that I frequently reference; the study demonstrated that people consume less health care when forced to pay higher co-pays. Numerous studies involving health savings accounts have corroborated what economists have always known: the more insulated people are from having to pay for something, the more of that thing they are willing to consume.

It seems to follow simple logic: if something is coming out of your pocket, you tend to pay attention. Obvious, right?

But allow me to make 2 additional points that this article brings to mind.

1. All of this progress can be undone if the Affordable Care Act is upheld as Constitutional. In our discussions on this blog, we try not to be too political in our commentary, but the fact remains that this piece of legislation is likely to fundamentally transform a sector of the economy that accounts for 17% of GDP. As employers unload employees onto government plans (which appears probable if recent polling is to be believed), the efficiency that we’ve seen when patients are accountable is likely to be erased. This was, and continues to be, my biggest objection to the legislation.
2. On a lighter note, if recent cost-controls keep pace, we’re on a better road. I believe that in addition to having consumption tied to the patient’s own wallet, the patient needs to be knowledgeable about their options and treatment courses. This will allow them to make more effective decisions, not simply financial ones. Instead of foregoing their yearly check-up just to save money, they may decide to forego an expensive drug and consider a generic instead. These types of informed trade-offs will add up for the industry as a whole as well as the individual patient.

The key may be helping the market find ways to create and attract more informed consumers who make more rational purchasing and health care usage decisions.