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Small Business Employee Benefits and HR Blog

White House Says Health Care Costs are Slowing - Is ACA Really a Factor?

According to the White House in an announcement this week, personal health care costs from May 2012 to May 2013 increased at the slowest rate in the last 50 years (1.1%). 

The announcement of slowing health care costs comes at a time when the White House is actively promoting key provisions of the Affordable Care Act (ACA) such as the opening of the health insurance marketplaces in October 2013.

Health Care Costs Are Slowing

Health care costs are still increasing annually, but at the slowest rate in decades. According to the White House, the slowdown in personal consumption expenditures (PCE) health care inflation has been across many health care areas, but attributed largely to significant inflation slowdown in hospital and nursing home services (42% of total health care expenditures), and outpatient services (34% of total health care expenditures).

Consumer prices for health care have risen at the slowest pace in nearly 50 years

Source: White House.

Additionally, a series of recent government and industry reports point to decrease in overall health care cost inflation. In May 2013, a Congressional Budget Office (CBO) report showed a $618 billion decrease in projected Medicare and Medicaid spending over the next decade. 

Is ACA a Factor in the Slowdown of Health Care Costs?

According to the White House, research is showing that that structural changes in the health care industry are a major part of the recent slowdown in health care cost growth, and suggests the trend may persist. 

Naturally, the White House points to the ACA as a contributor to a range of cost-saving and quality-improving measures. The ACA includes provisions intended to improve coordinated care, reduce preventable health complications during hospitalizations, and promote the adoption of more efficient health information technology. The White House provides the following examples of how the ACA is impacting health care costs:

  • The Partnership for Patients program  aims to reduce hospital complications and readmissions across the nation through partnerships with more than 3,700 hospitals and thousands of other organizations of doctors, nurses, and community-based groups. Since the program was introduced in 2011, the hospital readmission rate within Medicare fell below its historical average.

  • Under Accountable Care Organizations (ACOs), providers deliver care through organizations of physicians, nurses, hospitals and other providers responsible for the quality and cost of care to their patients over time. Medicare shares any savings with ACOs that meet rigorous quality standards. Currently, more than 4 million beneficiaries receive care from more than 240 ACOs participating in the Medicare Shared Savings Program and other related projects. 

  • The Hospital Value-Based Purchasing Program went into effect in October 2012. The program encourages more than 3,500 hospitals to provide high-quality care and reduces payments for hospitals exhibiting poor performance. Additionally, pay-for-reporting initiatives in which providers are rewarded for reporting clinical quality measures have been launched in virtually every Medicare payment category.

Source: White House.

What do you think... is the ACA really making an impact in the cost of health care? Will the trend persist when ACA is fully implemented in 2014? Let us know your thoughts or questions in the comments below.