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HEALTH ACTION NETWORK - ADVOCATES FOR BETTER HEALTH CARE SOLUTIONS

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This Week in Health Care Reform: February 16th, 2018

Signs point to health care inflation picking up; meanwhile, unnecessary medical care is found to be more prevalent than previously thought; and, new health spending projections are released.

Week in Review

Health Care Inflation: As the conversation surrounding rising health care costs continues to evolve, it’s only natural that attention should turn to how we’re spending those health care dollars.  Despite efforts to shine the light of transparency on what consumers are being charged, persistent, institutional murkiness still manages to obscure health care prices.  In addition, regional variations in how health care services are used, only serves to further complicate our ability to establish a meaningful baseline from which to operationalize meaningful improvements.  Against that backdrop, experts point to rumblings on the horizon which indicate a shift in the winds that have helped hold down health care price increases the past few years.  Specifically, in December, hospital prices rose 2.2 percent, the fastest rate in four years, in what many believe may be a harbinger of a return to the historical pattern of health care price increases outpacing the broader inflation rate.  Further, while rising prescription drug prices may dominate the headlines, the bulk of our total health care spend actually goes to hospitals, doctors, and other professional services.  While slower growth in health care prices has managed to suppress overall health care expenditures’ impact on inflation, that’s expected to change, with hospitals and doctor groups increasingly combining operations in their ongoing effort to accumulate bargaining power in order to command higher prices.

Unnecessary Care: O
n a separate but related track, a growing focus on health care costs has widened the collective aperture of stakeholders, many of whom have shifted their approach to tackling this issue to include an emphasis on addressing the total cost of care.  Undoubtedly, a key component of that approach has much to do with eliminating the waste in our health care system, so much of which is the result of unnecessary care – case in point, a new analysis in Washington state that sought to expose just how prevalent overused or unnecessary care continues to be.  Undertaken by the Washington Health Alliance, the nonprofit group examined 1.3 million insurance claims from patients who received one of 47 tests or services that have been flagged by medical experts as being either unnecessary or overused.  The results were astounding: In a single year, 600,000 patients underwent treatments they didn’t need at a cost of $282 million.  Also, more than one-third of the money spent on those procedures went to unnecessary care.  And, that’s just in Washington.  The waste epidemic has touched states all over the country, from Minnesota ($55 million) to Virginia ($586 million).

Spending Projections:
As if on cue, new health spending projections for the next decade were released this week from the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary.  According to their estimates, health spending in the U.S. is projected to rise 5.3 percent this year, a reflection of the rising prices of medical goods and services, and, an upward trend that’s forecasted to stretch into the foreseeable future.  While the CMS analysis points to several factors driving the increased spending, including the aging baby-boom population, prescription drugs are expected to see the fastest year-to-year growth, averaging a 6.3 percent increase over the next decade.  In fact, the growth in drug spending is expected to more than double in 2018 alone, increasing to 6.6 percent, compared to the 2.9 percent increase seen last year.  CMS forecasts health spending to rise an average of 5.5 percent annually through 2026, by which point, it is projected to reach $5.7 trillion, or 19.7 percent of the U.S. economy.      

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Spotlight

Exacerbating an already established trend, specialty drugs are projected to continue in their role as a major driver of prescription drug spending well into the future.
                                            
                                            

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