The slowdown in health care cost inflation seems to be global

by on July 17, 2014 at 7:33 am in Economics, Medicine | Permalink

…when it comes to health care spending, the picture is starting to look more global. After decades when health spending in the United States grew much faster than it did in other Western countries, a new pattern has emerged in the last two decades. And it has become particularly pronounced since the economic crisis. The rate of health cost growth has slowed substantially since 2000 in every high-income country, including the United States, Canada, Britain, France, Germany and Switzerland, according to data from the Organization for Economic Cooperation and Development.

The world’s health-care systems are also converging in important ways. New drugs and medical advances, which were once adopted locally and spread more slowly, are now experiencing international launches. Medical technology companies are increasingly global, and seeing regulatory approval in many markets at once. Strategies that can reduce the need for expensive hospital stays, such as performing surgeries in outpatient clinics, are expanding around the world.

Findings from medical research and the ways that doctors practice are also spreading faster and wider. “We’re learning from other countries, and the best practices take a year or two to diffuse, whereas in the past they might have taken five or 10 years,” said Gerard Anderson, a public health professor at Johns Hopkins. “We’re getting a convergence because of a more rapid diffusion of information.”

Two recent papers highlighted the trend. One in The Journal of the American Medical Association compared the United States with countries in the O.E.C.D. Its author, David Squires of the Commonwealth Fund, a New York health care research group, concluded that the similarities in spending growth suggested that “the factors that stimulated the slowdown in the United States also affected other industrialized countries.”

The other paper, from the O.E.C.D.’s own economists, made a similar point, highlighting that what really differentiates the United States from other countries is the high prices we have long paid for medical care, not big differences in how doctors are treating their patients.

That is all from Margot Sanger-Katz at The Upshot.  I would note that those mechanisms of transmission still seem a little murky to me.

Jay July 17, 2014 at 7:43 am

“ObamaCare CAUSED global healthcare inflation to slow.”

-Leftwing lunatics

F. Lynx Pardinus July 17, 2014 at 7:58 am

Uh, no one important is saying that.

Andrew' July 17, 2014 at 10:01 am

I wish the people not not saying it weren’t “important.”

The Zuck July 17, 2014 at 8:04 am

Studies show having strong personal relationships improves health. That’s why I credit Facebook for improving the global health outlook.

Oakchair July 17, 2014 at 2:08 pm

The three studies done on obamacares effects on health costs all conclude that Obamacare will slightly lower total health care costs (after ten years) despite expanding health access to tens of millions of people.
Early pilots of Medicares new payment system find that it reduces costs by 5% while improving outcomes by 13%, they also found that Medicares payment structure “leaked” into the private sector with hospitals adopting Medicares practices resulting in similar cost reductions and quality improvement in the private sector as in Medicare.
Obamacare does a lot to control health costs ranging from adopting medical loss ratios, reducing the # of years on drug patients, ending subsidies to medicare advantage, increased competitive bidding, increased regulations allowing and mandating more computerized records etc, expansion of wellness programs and other health improving policies such as nutritional labeling.
Oh you didn’t want to hear about reality and instead want to live in some fantasy bubble, my bad.

Al July 17, 2014 at 8:55 pm

@Oakchair: Can you explain what the following things mean and how they “control health costs”?

* “adopting medical loss ratios”
* “reducing the # of years on drug patients”
* “health improving policies such as nutritional labeling”

About how much money do each of these things save?

Thanks!

Oakchair July 18, 2014 at 9:17 pm

Adopting a medical loss ratio forces corporations to spend less on administrative/non medical related costs, and given that government insurance such as Medicare spends 20% less on administration there is a lot of room for cost cuts. In 2011 the medical loss ratio directly reduced costs by 1bn while in 2012 it reduced costs by 2bn[1]
Patients create a monopoly which allows a company to charge more for drugs, reducing the # of years a patient lasts means more competition will result in lower drug costs. Generic drug adoption results in a 52% drop in drug costs[4]
Nutritional labeling causes people to chose healthier food items resulting in less obesity and diseases. Studies find labeling reduces caloric intake by 106 calories per meal[2] Health professionals estimate that if every person reduces caloric intake by 20 calories a day it would save 20bn a year due to reduced diabetes and heart costs.

[1]http://kff.org/health-reform/perspective/beyond-rebates-how-much-are-consumers-saving-from-the-acas-medical-loss-ratio-provision/

[2]http://www.bbc.co.uk/news/health-14295093

[3]http://www.washingtonpost.com/blogs/ezra-klein/post/how-20-calories-make-a-big-public-health-impact/2011/08/26/gIQAOZR4fJ_blog.html#pagebreak
http://www.diabetes.org/diabetes-basics/diabetes-statistics/
http://articles.cnn.com/2006-10-30/health/heart.overview_1_heart-disease-american-heart-association-obesity?_s=PM:HEALTHhttp://www.cdc.gov/nchs/fastats/heart.htm

[4]http://www.optimahealth.com/wellnesspayoff/siteresources/Generic-Drugs-Colligan.pdf

TallDave July 19, 2014 at 1:00 pm

You certainly aren’t familiar with the basics of the healthcare debate. Private insurance companies can’t outsource their revenue collection to the IRS. There are no “efficiencies” there, just coercion.

But thanks for another long-debunked claim.

John Thacker July 17, 2014 at 7:53 am

From what I recall of the statistics, US healthcare prices have been high for a long time, but the rate of growth has not been significantly higher than in other countries; rather, it’s started from a higher base. (Of course insurance coverage means that people see those prices differently, sometimes as lower wage gains if compensation goes towards insurance. But note that the average US consumer pays a *lower* percentage out of pocket than in many universal systems, such as in France.)

Certainly if it’s a global phenomenon, that makes it harder to credit either the PPACA or the growth of HSAs in the US. (The latter seeming equally valid, judging by when the law establishing them was passed and the start of the slowdown.) It can simply be innovation working in a different way; some medical innovation has always been improved new treatments, but much more expensive than what came before. If there’s less of that (and perhaps more of cost-saving innovations) that would affect things surely.

Oakchair July 17, 2014 at 1:52 pm

Nope doesn’t look like that. In 1970 the united states had similar health care costs as those of other developed countries.
http://kff.org/health-costs/issue-brief/snapshots-health-care-spending-in-the-united-states-selected-oecd-countries/

Megan McArdle July 17, 2014 at 3:35 pm

Yes, costs were similar in the 1970s, then grew wildly in the 1970s and 1980s, probably because Medicare was enacted without any meaningful cost controls. Our growth rate is now middle of the pack, but the level from which we are growing is vastly higher.

Oakchair July 17, 2014 at 5:16 pm

Medicare costs have increased 61% less (this is in 2012, meaning that they have increased even less since then) then private health insurance[1] this is despite the CBO estimating that Medicare provides 11% better health outcomes[1]. If Private insurance costs had grown at the same rates as Medicare then American health care costs would be similar to other advance nations (though still slightly higher).
So do you have anything pertaining to reality to add?

[1]http://thinkprogress.org/politics/2012/07/02/509421/morning-briefing-the-health-care-fight-moves-to-implementation/

TallDave July 18, 2014 at 11:03 am

Medicare has also grown much faster than was originally estimated. When people choose to buy more private healthcare, it doesn’t result in a fiscal crisis.

Private healthcare in the United States is vastly superior to other countries at the margins, but the margins have relatively little effect on overall LE. Medicare and Medicaid are monopsony free riders on that system, which is why more and more doctors are refusing them.

http://www.forbes.com/sites/theapothecary/2011/11/23/the-myth-of-americans-poor-life-expectancy/

Also, Medicare does not outperform private insurance.

AHIP said the AHRQ data show that:

Hospital days were reduced by 30% in California and 23% in Nevada for Medicare Advantage beneficiaries when compared with traditional Medicare enrollees
Medicare Advantage readmissions in the same quarter for the same condition were 15% less often in California and 33% less often in Nevada compared to Medicare
In both states, Medicare Advantage seniors were 6% less likely than seniors in Medicare to be admitted to the hospital for conditions described by AHRQ as “potentially avoidable,” such as dehydration, urinary tract infection, or uncontrolled diabetes
AHIP says the AHRQ data also found that Medicare Advantage seniors with chronic conditions in California and Nevada:

Spent an average of 18% fewer days in the hospital than seniors in Medicare
Had an average of 27% fewer visits to the ER than those seniors in Medicare
Experienced a 42% lower rate of hospital readmissions than seniors in Medicare
Had avoidable admissions that were 13% lower than those seniors in Medicare

Oakchair July 18, 2014 at 6:07 pm

More doctors accept Medicare then they accept private health insurance[1]. In fact people with private insurance report that their doctors do not accept their insurance at a rate 70% higher then those with medicare[2] People with private insurance had 150% more problems accessing health services then those on Medicare, this gap increased from 2001-2007.[2]
The CBO found that Medicare provided 11% better health outcomes as I already stated in the post you’re replying to. Furthermore 40% more Medicare patients report excellent care then those iwth private insurance and 37% of Medicare patients report getting recommended care[2]
So as I said to Megan Mcardle, TallDave do you have anything pertaining to reality to add? Or are you just going to spew more lies and bullshit?

[1]http://www.usatoday.com/story/money/business/2013/08/22/report-medicare-physician-access/2682301/
[2]http://www.commonwealthfund.org/Publications/In-the-Literature/2009/May/Meeting-Enrollees-Needs.aspx

Oakchair July 18, 2014 at 6:15 pm

On Medicare advantage (aka privatized medicare that piggybacks on medicare system). Studies on its health outcomes find that it has at least 7% worse health outcomes and at most 38% worse health outcomes[1]. This is despite Medicare advantage plans kicking the sickest seniors out of their plans and cherry picking only the healthiest seniors[2] Those entering medicare advantage use 20% less services and those exiting use 40% more services[2] Despite all that Medicare advantage costing 18% more[3]
Reality try it some time.

[1]http://www.medicareadvocacy.org/2010/08/28/private-medicare-plans-do-not-offer-better-health-outcomes/
[2]http://www.motherjones.com/kevin-drum/2012/10/chart-day-cherry-picking-medicare-market
[3]http://www.ama-assn.org/amednews/2009/01/05/gvl10105.htm

TallDave July 19, 2014 at 12:06 am

None of your sources actually say anything like what you claim. Some of them don’t even work. I guess you just assume no one checks.

I posted actual statistics showing Medicare underperforms. It’s also been shown in the Oregon study that Medicaid does not improve health outcomes vs having no insurance at all (but good news, it does increase costs!), which was discussed here endlessly.

Welcome to reality.

Jan July 17, 2014 at 8:01 am

Yet the US has achieved this while insuring millions of additional people. I’d expect that is not the case in most other countries.

mm July 17, 2014 at 9:03 am

Two problems- 1st- they got healthcare before & someone paid for it (i.e. don’t confuse insurance w/healthcare) so much of the cost was already there- people weren’t dying outside the ER doors. 2nd- the law hasn’t had time to cause much of an effect, yet- many are only beginning to get covered & the question is will they seek more services now.

Jan July 17, 2014 at 10:56 am

Probably they did get health care before, though people without insurance use much less of it. The second point is legit and I’m sure some costs will catch up with us. Some of these folks haven’t had their coverage vary long, though some have (e.g. states that expanded Medicaid early; many of the people who were allowed to stay on their parents’ insurance until 26 would have surely gone uninsured were it not for the coverage extension, which started years ago). Perhaps health care is being delivered more efficiently?

mm July 17, 2014 at 6:35 pm

I hope it is more efficient, but I have my doubts- part of it is we may be reaching the limit- “something that can’t go on for ever won’t”

Becky Hargrove July 17, 2014 at 8:04 am

U.S. – outpatient clinics for relatively simple procedures, perhaps, but the vast majority of those with severe chronic conditions and the kinds of disease which particularly strike the elderly cause the majority of patients to “wait in line” for a position at the primary hospitals in any given state which can take care of them. Knowledge dispersal????? Not so much.

rayward July 17, 2014 at 8:54 am

Yes, a little murky, because the slowdown is in both public (Medicare) and private spending. My observation as someone working closely with physicians is that the increase in co-pays and deductibles has profoundly affected patient behavior, which is particularly evident in those specialties that treat chronic diseases, such as heart disease. Cardiologists almost universally report that patients are deferring regular check-ups, with the first quarter (the “deductible quarter”) being the period with the most pronounced change. For patients with private insurance plans, this is understandable as co-pays and deductibles have gone up, way up. For patients with public plans, this is less understandable. This may seem counter-intuitive, but reducing the number of uninsured could have the effect of reducing their health care consumption. Why? Because with insurance come co-pays and deductibles, whereas the ER has neither (bill collectors yes, but they come later, much later than health care consumption).

edgar July 17, 2014 at 9:03 am

cough, cough…global warming..cough, cough

prior_approval July 17, 2014 at 9:22 am

‘highlighting that what really differentiates the United States from other countries is the high prices we have long paid for medical care, not big differences in how doctors are treating their patients.’

Best health care system in the world – for doctors.

The AMA continues to look down at the NRA – after all, the more effective the NRA is, the more the AMA’s members cash out, while the reverse is clearly not the case.

TMC July 17, 2014 at 11:50 am

Interesting observation, of course ass backwards.
NRA success reduces crime, leads to fewer injuries and less stress related problems!

Oakchair July 17, 2014 at 1:55 pm

—-Best health care system in the world – for doctors.
That is doubtful, given that doctors in Canada and other nations have ten times less paper work and bureaucratic dealings with insures

Bill July 17, 2014 at 10:02 am

It’s interesting that people do not read the article before posting or commenting:

1. The article states that the US instituted and other countries continued their cost control mechanisms which account for the decline.

2. US costs declined because they paid less to insurers and hospitals following Obamacare.

3. In line with other countries, the US has begun to limit procedures which cost but do not improve healthcare outcomes.

4. If you look at the charts in the article, you will see that the US decline was not as fast as other countries, nor as deep.

TallDave July 17, 2014 at 10:45 am

The second report is terrible. I can see them writing the same article about food in the 1970s: “The higher expenditures for food in the United States relative to the Soviet Union is largely explained by the former’s higher prices.” Price controls will always have consequences, as will subsidies.

Meanwhile, the VA is giving us all an educational view of what single-payer healthcare looks like, with not just death panels but death lists, coverups, massive employee fraud, zero accountability, nurses refusing orders in the OR from whistleblowers… and still, nothing being fixed.

Bill July 17, 2014 at 10:58 am

TallDave,

The VA is giving us an education on what the House’s austerity program leads to. The VA had requested more money for doctors, but instead had to limit the number of FTEs because of the House Budget. The current reform proposals in the House are now wrestling with where to find the money.

I am sure they will find some gimmick, just as they did for the Highway Trust Fund.

Cliff July 17, 2014 at 11:49 am

Yep, budget cuts inevitably lead to massive fraud on the part of public officials that kills thousands of American citizens. Better increase funding!

Willitts July 17, 2014 at 12:03 pm

The fraud was the result of employees vying for BONUSES to their paychecks.

Bill obviously also doesnt understand when the marginal costs of services is below market price, they will be overutilized. His solution, of course, is to expand services to meet excess demand because we all know that everyone who goes to the VA has a service connected sucking chest wound after jumping on a live grenade.

I wonder if he has actually ever received care at a VA.

Oakchair July 17, 2014 at 2:02 pm

If it weren’t for the budget cuts the VA could of processed the new applications and then provided care to them. Its odd how you are unable to grasp what the problem is because your to emotional to get pass the word “fraud”

TMC July 17, 2014 at 11:53 am

I always wonder if you cringe writing this type of post, Bill.

Willitts July 17, 2014 at 11:58 am

I asked my government for a million dollars. I didnt get it. Because I didnt get it, I cant buy things I like. Hence, House austerity is the reason I cant get what I want.

mavery July 17, 2014 at 3:20 pm

Like healthcare for veterans? wtf?

Ricardo July 17, 2014 at 12:37 pm

The people at the VA that I know (none of them doctors, mind you) tell me that they’re given so much money, they don’t know what to do with it. They have a huge IT budget, for example, which is earmarked for specific expenditures and cannot be shifted to pay for more doctors, nurses, etc.

Bill July 17, 2014 at 3:06 pm

Ricardo, You may know people in the VA who are in IT, but you admit you do not know VA doctors.

My son in law is a VA doc. They have 1) opened positions they cannot fill because of pay limitations and 2) they need to add more docs to some specialties because there is a cap on FTE docs based on budget line item limitations in the VA bill. So, even if there is money for IT, that doesn’t mean there is money for docs, or that they can transfer money from one budgeted line item to another, given the appropriations bill.

TallDave July 18, 2014 at 10:54 am

Yes, hence the death lists.

On this page you will see several posts singing the praises of the VA’s cost controls, right next to others bemoaning the lack of funding.

TallDave July 19, 2014 at 12:17 am

Heh. The first budget cuts always seem to affect White House tours, the IRS’ urge to attack the enemies of the Democratic Party, and the need for secret veteran’s death lists.

If only the U.S. were spending more per capita than virtually any other country in the world. Oh wait, we are.

Only the government could respond to corruption with demands for more taxpayer money.

Oakchair July 17, 2014 at 2:00 pm

1) The VA isn’t single payer. This means your credibility on the topic is near 0.
2) Since 2008 VA funding has grown at 1/3rd the cost of private sector funding per person (mostly due to Obama expanding the number of Veterans who can use the VA and the GOP not granting the VA funding) This means that the VA costs around 65% less the private health care.
3) In the Mid 00’s 3 studies were done on the quality of care done at the VA on average they found that the VA provided 30% better health outcomes compared to private sector care.

Oakchair July 17, 2014 at 2:00 pm

1) The VA isn’t single payer. This means your credibility on the topic is near 0.
2) Since 2008 VA funding has grown at 1/3rd the cost of private sector funding per person (mostly due to Obama expanding the number of Veterans who can use the VA and the GOP not granting the VA funding) This means that the VA costs around 65% less the private health care.
3) In the Mid 00’s 3 studies were done on the quality of care done at the VA on average they found that the VA provided 30% better health outcomes compared to private sector care/.

TallDave July 18, 2014 at 10:52 am

Who do you imagine are the multiple payers for VA healthcare? There are single-payer systems that do not use government employees to provide healthcare, but there are also single-payer systems that do — like the VA.

Never mind, you’ve convinced me. Death lists for everyone!

Oakchair July 18, 2014 at 6:17 pm

Its hard to convince you of much when you so clueless that you don’t even know what type of health care system the VA is. But go on ignoring the fact that despite the VA costing 65% less and providing 30% better health outcomes that it is worse because it doesn’t have the funds to accept new patients.

triclops July 18, 2014 at 11:28 pm

Is oakchair a troll? It keeps contradicting itself so blithely.

So hard to tell these days…

TallDave July 19, 2014 at 12:09 am

And 90,000% more secret death lists and 8,000,000,000% more phony statistics.

You do realize you’re citing data that was fabricated by the VA officials to max out their bonuses? That’s why they made the secret veteran death lists.

I’m just waiting for the other shoe to drop, the one where we find out Tea Party members were given extra special consideration.

Willitts July 17, 2014 at 11:55 am

Imagine that, yet another conflation of costs with expenditures.

an Onyx Mousse July 17, 2014 at 3:22 pm

As a pharma industry employee, I can confim that new drugs and devices now launch globally in many or most of the large healthcare markets within a timeframe of months, rather than 5-10 years to be rolled out into minor markets, which was the case 20 years ago. This is due to building more agreements, such as the ICH conferences, on approval requirements for different health markets.

Internet has allowed information on best medical practives to spread much more rapidly through the healthcare system. There has been a lot of low hanging fruit on the efficiency tree in many healthcare systems all around the world – they were probably one of the very last industries to implement “Lean” efficiency concepts pioneered by Toyota in the 70’s and 80’s (but it’s happening now) – this means not moving equipment and people around unnecessarily, using checklists and systems instead of relying on individuals to remember everything, etc. Healthcare as a whole was also quite slow on the uptake for advanced information systems relative to other industries, due to regulation and constantly changing requirements, but again its making a difference now.

Joshua July 17, 2014 at 3:40 pm

One thing I haven’t seen mentioned is the slower rate of healthcare innovation. I know that fewer drugs are being released, and I suspect the same is true of medical devices.

e.g.: http://www.thedailybeast.com/articles/2013/05/08/has-medical-innovation-slowed-down.html

If there are fewer new things to spend money on, there are fewer reasons for health expenses to rise. This is not necessarily a good thing though. Less innovation = fewer health increases, though maybe this will be made up in other areas.

Mesa July 17, 2014 at 9:14 pm

Suppose you and some others have a business where you raise the price 4% every year and yet the demand goes up, because the population is increasing and aging, and there are no demand restrictions, and the entire population shares the cost by borrowing money from China at zero percent. Now everyone starts to focus on this and starts threatening various reforms and regulations. Maybe you stop raising your prices.

HL July 18, 2014 at 12:22 pm

Along those lines, the rise in healthcare spent as percentage of GDP had to stop at some point. With food and energy prices going up, there is only so much to spend.

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