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The Health Care Cost Slowdown Could Be Here To Stay, Saving Companies And The Government Billions

By Sy Mukherjee on June 18, 2013 at 1:00 pm

"The Health Care Cost Slowdown Could Be Here To Stay, Saving Companies And The Government Billions"

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U.S. health costs have been slowing down — and will continue to do so thanks in part to changes in the health care industry spurred by Obamacare, according to a new analysis by consulting giant PricewaterhouseCoopers (PwC).

PwC’s report finds that a combination of factors — including Americans’ increasing use of inexpensive retail clinics for basic medical care, employers doing business with hospitals that do complex procedures for less money, government incentives to make hospitals more efficient, and companies’ efforts to cut wasteful spending while promoting their workers’ health — are sustaining a recent slowdown in health care cost inflation.

First of all, the health law is encouraging a flood of retail health clinics, since hospitals will need some help to treat the millions of Americans expected to gain insurance coverage under Obamacare. Retail health clinics are a cheaper and more readily available resource for consumers who want preventative and primary care, rather than more complex procedures.

Obamacare also provides hospitals with a both a carrot and a stick for improving patients’ care while reducing their costs. For instance, Obamacare allows the federal government to tweak how much money hospitals receive depending on how they score on several patient satisfaction and quality questionnaires — a “pay for performance” model that has the potential to slash excess health spending. Additionally, the reform law establishes “accountable care organizations” (ACOs) that receive bonuses if they can take over — and improve — all aspects of elderly and disabled Medicare beneficiaries’ care while reducing the number of times those patients have to come back to the hospitals. Early numbers indicate that ACOs are already improving seniors’ medical treatment while saving hospitals millions.

Finally, the law forces employers to reorient their approach to providing their workers’ insurance, emphasizing cost-sensitivity and preventative and primary care services that promote Americans’ health and make it less likely that workers will have to pay exorbitant costs due to a pricey health condition. Many have done so by combining high-deductible health plans (HDHPs) with worker-wellness programs and in-house company clinics to improve and manage employees’ health.

PwC estimates that the combination of these provisions will limit historically-high health care inflation to 6.5 percent next year — significantly lower than the firm’s more pessimistic earlier projections. The new numbers also reflect growing confidence that the slowdown in costs is occurring because of systemic changes spurred by health care reform, and not just less medical consumption due to the recession.

That will ultimately mean lower premiums for Americans pursing medical care, and less spending on government health programs. In fact, several other analyses — including by the Congressional Budget Office and Medicare’s trustees — have found that the downturn in health care costs have extended Medicare’s solvency by two years while potentially lowering the budget deficit by over $700 billion.

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