Why it’s hard to predict the price of health care

Chrome caduceus casting a shadow of a dollar on a white background

If you read this blog regularly you know that a couple of weeks ago I shared how projections for health care spending from 5 years ago were overstated by about 20%.  Projecting health care spending is difficult for a few reasons, here’s just a few.

1.  Part of what determines how quickly health care spending grows is the health of the overall economy. When the economy is doing well, people spend more on health care. Unless you bury all your money in the backyard and live off of the grid you realize that our economy is still recovering from what’s been labeled the “Great Recession”.  How far it recovers and how quickly, will impact health care spending.

2.  Technology is expensive and new technology increases costs in health care.  The rate at which new technology emerges that helps to diagnose and treat medical conditions will impact health care cost.

3.  Health care reform is supposed to have an impact on cost.  These reforms aim to move the American health care system from one that pays for volume, rewarding doctors for providing lots of services, towards one that pays for value — rewarding doctors for helping patients get healthier.  Medicare and Medicaid are heading down the value road and some private insurers are following suit.  It’s hard to know just how much impact the shift from volume to value will have, partly because the baby boomers are reaching the age where they will require more services so savings in value may be offset by more people needing services.

4. Over the last few decades, there has been a shift toward patients paying for more of their own care. The idea is that when people have higher cost-sharing — higher deductibles and copays — they will make more careful choices about when and how often to seek medical care, which should reduce some unnecessary doctor’s visits.  A shift toward higher patient cost-sharing has helped hold down spending growth over the last few years but can it continue?

5.  One of the results of the Affordable Care Act and a move by private insurance has created what are called “narrow networks”.  The word “narrow” is key.  A narrow network means patients have fewer choices on where to receive care.  Some view narrow networks as a form of rationing because patients may be less likely to travel and for providers who don’t have the population base to participate in narrow networks survival will be difficult which will in turn create even greater access to care problems.  Fewer providers and difficult access could lower cost because efficiency can be gained but the reverse could occur when fewer providers have greater power to negotiate rates which could drive up cost.

About Craig Thompson

I am a young professional with two great sons, and I work in the healthcare setting. I am employed in hospital administration and serve as Chief Operating Officer at Golden Valley Memorial Healthcare in Clinton, Missouri. These are challenging and exciting times in healthcare and my blog will focus on healthcare, raising boys or being raised by boys, and living in mid America.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s