News Feature | July 5, 2016

RWJF Predicts Healthcare Spending Will Drop By $2.6 Trillion By 2019

Christine Kern

By Christine Kern, contributing writer

Study investigates implications of slowdown in health spending growth for the future.

According to the findings of an Urban Institute report funded by the Robert Johnson Woods Foundation, healthcare spending is anticipated to be $2.6 trillion less than projected between 2014 and 2019, when compared to initial 2010 projections. Study authors note that, despite signs of spiking health spending in 2014, the evidence suggests that spending growth has slowed once again. Researchers based their findings on health expenditure data from CMS and said they adjusted each year for the absence of the sustainable growth rate system for physician payment rates in Medicare.

The authors attributed the projected drop in national healthcare spending to the effects of the Supreme Court’s ACA decisions and sequestration in the Budget Control Act of 2011, as well as the recession and subsequent sluggish economic recovery. “There are many potential drivers of the recent slowdown in spending growth rates, and no one can be sure how MACRA may impact spending going forward,” said Katherine Hempstead, a senior adviser at the Robert Wood Johnson Foundation. “If this healthcare spending growth slowdown continues, spending will be trillions less before the end of the decade.”

While CMS actuaries have assumed the economy is primarily responsible for the slowdown, meaning that higher growth rates should return in the event of a robust economy, the RWJF report argues there are multiple ways the ACA could have contributed to the lower projections, including:

  • Impacts on utilization from payment adjustments implemented in 2011;
  • lower Medicare payment rates possibly influencing lower rates from other payers;
  • possible influence from Medicare policies, such as penalties for readmissions, on other payers; and
  • premiums for marketplace plans being lower than expected due to competition and narrow networks.

“When CMS originally made those projections, they really thought the slowdown in healthcare spending [growth] was mostly due to the recession, and afterward we’d see a return to the higher rates of spending growth — and that didn’t really happen,” said Hempstead according to The Washington Post.

The reported added CMS has not attributed any cost reductions to accountable care organizations, medical homes, or other delivery system reforms that have been growing in recent years.

“If the ACA and other factors discussed above have contributed to slower spending growth in unmeasured ways, then slower growth may persist beyond current projections,” the report concluded. ”But if the economy was the primary driver of slower growth, then we should expect a return to faster growth with a robust recovery.”