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Will The Limited Growth In Healthcare Cost Continue? Stuart H. Altman Chaikin Professor of Health Policy Heller School for Social Policy and Management Brandeis University Yes--Healthcare Spending Growth Nationally Has Slowed But Will It Continue? Average Annual Percent Change in National Health Expenditures, 1960-2012 Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip). So How Are We Doing In Massachusetts? Personal Health Care Expenditures In Massachusetts and U.S. Relative to Economy (Percent of GDP) Massachusetts Health Policy Commission, 2013 Cost Trends Report, December 2013 And Slowdown Continued In 2013! Similar To What Is Happening Nationally So---Where Do We Go From Here? Medicare Actuaries Think Limited Growth Will Return As a Result of An Expanding Economy and Aging Medicare Recipients Growth In Yearly Healthcare Spending Actual (2012-2014) and Projected (2015-2019) Most Growth From Medicare and Medicaid Spending Increases! Even For Medicare Most of Growth The Result Of More Care for Older Patients Growth in Health Care Spending By Payer: Actual 2012-2014, Projections 2015-2019 Source: Office of The Actuary, CMA , September 2014. But--- Actuaries Expect Private Insurance Spending Growth Rates To Stay Constant This May Occur But Not Without a Fight! WHY--- In The Past---Most Hospitals Able to Make-Up Shortfalls From Lower Government Payments and Uncompensated Care By Higher Payments From Pvt. Patients Private Insurance Payments Used to Pay for Lower Government Payments But What About The Future? With Government Patients a Larger Component of Total--- Greater Pressure on Pvt. Insurance to MakeUp for Shortfall Growth in Enrollment by Payer Source, 2006 - 2022 CMS, National Health Expenditure Projections, 2012 to 2022, January 2013. Total Health Insurance Payments by Payer Source 2006 versus 2022 (Percent of Total) 60% 51.7% 48.7% 50% 43.2% 2006 46.7% 2022 40% 26.5% 29.6% 30% 20.2% 22.1% 20% 10% 0% Private Govt. Total Govt. (Medicare) CMS, National Health Expenditure Projections, 2012 to 2022, January 2013. Govt. (Medicaid) But Private Payments Would Need To Grow Substantially To Maintain Hospital Margins I Don’t Think You Will or Can Let That Happen! The Push Back By Employers, Employees and Individuals Will Be Too Strong! In The Past Hospital Spending Driven More By Cost of Care (Reimbursement Model) In The Future Cost of Care Likely To Be Driven More By Spending Limits (Payment Model) Hospitals Are Responding To New Reality--- Hospital mergers are on the rise again 24/37 In Reaction---Federal and State Anti-Trust Activities are on The Rise--- Courts have sided with federal antitrust enforcers in recent years FTC victories in past 6 years: • General-acute care hospital mergers – – – – Innova – Prince William (Virginia) Rockford – OSF Healthcare (Illinois) ProMedica – St. Luke’s (Ohio) Capella - Mercy (Arkansas) • General acute care-specialty hospital mergers – Reading Health System – Surgical Institute of Reading • Physician mergers – St. Luke’s – Saltzer Medical (Idaho) Several State Attorney Generals Have Imposed Conduct Remedies on Big Hospital Systems 26/37 But---Use of Ant-Trust Authority is Expensive and Difficult---We Have Seen It In Action Limited Antitrust Actions In Healthcare 28/37 What Is Massachusetts Doing To Help Providers Adjust To This New Reality Chapter 224 a Major Advance Health Policy Commission • Financially Support Restructuring of Community Hospitals • Certify ACO and Patient Centered Medical Homes • Help Providers That Wish To Take Risk on Lowering Costs • Work With Other State Agencies To Assess Adequacy of Delivery System Brandeis University 30 Government Can Help--- But It’s Weapons are Limited Too!!! HPC Has Some Authority To Pressure Providers and Payers To Make System More Efficient and Lower Premiums---But Major Option is AntiTrust Restrictions? But What About Rates--- That’s the Job of The Market Are Current Low Rate Increases Being Influenced By Added Patient Revenues from The Affordable Care Act? Will This Continue In The Future or Do We Need Stronger Market Forces? To Make Markets Work--We Need Both Supply Changes (New Delivery and Payment Systems And Demand Changes (Benefit Design and Limited/Tierd Networks You Know What To Do on Benefit Design and Tierd Networks--But To Help Change The Delivery System You Must Help Change The Payment System That Provide Needed Incentives