Both political parties agree that medical inflation has been on an unsustainable trajectory for decades. Health care costs have gobbled increasingly larger portions of government budgets, leaving less money for other important priorities, such as higher education. It’s no coincidence that tuition has also outpaced the general inflation rate as well. In some states, Medicaid spending has surpassed the K-12 budgets. In addition, the cost of government employee benefit packages keeps creeping up.
But a surprising twist has occurred over the past three years: Health care costs have slowed, and officials are hoping this heralds a new long-term trend. According to data released Monday by the Centers for Medicare and Medicaid Services, the health care inflation rate in 2011 lagged the rest of the economy for the first time in more than a decade. The two previous years had below-average growth rates of 3.9 percent.
If this were to continue, it would offer significant relief to budgets everywhere. But there are skeptics who believe this slowdown is merely a reflection of the sluggish economy of the recent past. This assessment has merit, because more people have moved from private insurance to Medicaid after losing their jobs, and the government reimburses providers at a lower rate. Plus, some people might be putting off procedures until their household budgets improve.
At the same time, there has been a tighter focus on reining in health care costs, and expectations have changed. The national health care debate has at last brought costs to the forefront. Consumers, providers, insurers and the government have grown more conscientious because they can’t escape the impact of soaring increases. The mindset that we can get whatever we want because someone else is paying is changing.
The government’s report doesn’t credit the Affordable Care Act for depressing prices because it doesn’t kick in until next year. But an acceptance of some of the law’s cost controls will be critical to restraining medical inflation. The Independent Payment Advisory Board is charged with keeping Medicare costs on pace with economic growth plus 1 percent. If costs exceed that, the board must produce cost-cutting solutions without cutting benefits. Congress can intervene, but it must come up with the same level of savings.
Our leaders ought to stick with this disciplined approach and not give in to partisan desires to undermine the law. The Medicare budget needs all the help it can get. However, the Hill, a newspaper that covers Congress, reports that House Republicans are looking for ways to gut the IPAB, which was unfairly tagged at the outset as a “death panel,” or an agent of rationing. The panel cuts costs, not services, and the government needs to hold the line on spending. Fortunately, costs have been tempered, so the IPAB need not act right away.
As the economy continues to recover, the temptation will be to ease the grip on health care prices. But for the health of the nation, we need to turn the recent trend into the new normal.