"Obama Tackles CMS Report, Here Is How It Bends The Cost Curve"
This morning, ABC News’ Jake Tapper asked President Obama about a recent CMS report which found that health care spending will increase slightly faster than projected — at an annual rate of 6.3 percent, rather than 6.1 percent. Obama began by saying that “bending the cost curve on health care is hard to do,” and admitted that the administration expected that annual spending would increase as the newly uninsured enter the health care system:
TAPPER: CMS study from February predicted a 6.1% increase and now post health care, 6.3%, so it seems to have bent it up.
OBAMA: As I said Jake.I haven’t read the entire study, maybe you have. But, you know, if what the reports are true, what they’re saying is that as a consequence of us getting 30 million additional people health care at the margins that will increase our costs, we knew that. We didn’t think that we were going to cover 30 million people for free. But that the long-term trend in terms of how much the average family is going to be paying for health insurance is going to be improved as a consequence of health care. And so our goal on health care is, if we can get instead of health care costs going up 6% a year, it’s going up at the level of inflation and maybe just slightly above inflation, we’ve made huge progress.
Ezra Klein tweeted that Obama should bring charts to his pressers, and I agree. Because if you actually look at the graph in the CMS report, you’ll see that while the cost curve does go up during the period of coverage expansion, once the cost savings and efficiencies kick in, the cost curve actually goes down.
Beginning in 2014, as 30 million+ individuals begin receiving health care coverage and visiting doctors, health care expenditures will naturally increase. Costs will continue to grow higher than current law until around 2015, at which point the Medicare savings, the excise tax on so-called Cadillac health plans, and the Medicare payment board will cause costs to “decelerate.” As you can tell from the graph, between 2017 and 2019 the red line is below the blue line — the annual growth rate is decreased under reform for that period.
The graph suggests that if Congress maintains the efficiencies in the bill, the so-called cost curve will continue to decrease and more can be done to bring it down lower and faster. For more ideas on that, check out this RAND Corporation study on options for lowering health spending.