Navigation Links
Saving money on medical costs

A slowdown in the growth of U.S. health care costs could mean that Americans could save as much as $770 billion on Medicare spending over the next decade, Harvard economists say.

In a May 6 paper published in Health Affairs, David Cutler, the Otto Eckstein Professor of Applied Economics, and co-author Nikhil Sahni, a senior researcher in Harvard's Economics Department, point to several factors, including a decline in the development of new drugs and technologies and increased efficiency in the health care system, to explain the recent slowdown.

If those trends continue over the next decade, they say, estimates of health care spending produced by the Congressional Budget Office and Centers for Medicare and Medicaid Services (CMS) Office of the Actuary could be off by hundreds of billions.

"Historically, as far back as 1960, medical care has increased at about one-and-a-half to two percent faster than the economy," Cutler said. "In the last decade, however, medical care has not really grown as a share of the GDP. If you forecast that forward, it translates into a lot of money."

Money, Cutler said, that could have a profound effect not just on government spending, but on average workers as well.

If the growth in costs remains flat, Cutler said, money companies might otherwise spend on health care could be directed back to workers in the form of increased salaries. Reduced health care costs could also help relieve financial strain on other critical government programs at both the state and national level.

"At the federal and state level, we've cut everything but health care," Cutler said. "If we can hold the growth in health care spending down, it would reduce the pressure on government, and would allow us to avoid funding one program at the expense of others, or raising taxes."

While recent forecasts by the CBO and Medicare actuaries have taken the recent slowdown in health care spending into account, those estimates come with a fatal flaw an assumption that costs have slowed largely due to the 2007 recession.

By comparison, Cutler and Sahni's study suggests that just over a third, about 37 percent, of the decrease could be chalked up to the recession. Instead, they say, the bulk of the decline could be attributed to factors like a decline in the development of new treatments.

"For whatever reason, the technology that's available for treating people seems to be improving at a slower rate than in the past," Cutler said. "In recent years, there have been a number of oncology drugs that have been touted as potential blockbusters, but most haven't sold as well as expected. Other analysts have also noted that while research and development spending by pharmaceutical companies has increased dramatically, the number of new drug approvals has remained flat."

With the passage of the Affordable Care Act, Cutler said, health care providers received new incentives to increase efficiency and reduce costly problems, such as readmitting patients soon after discharge and in-hospital infections.

"There are a variety of different programs where we've said if you're efficient you'll be rewarded, and so that's what a lot of institutions are trying to do," he said.

Steep out-of-pocket costs have also resulted in many people even those who are insured choosing to defer some treatments in the interest of saving money.

"A typical insurance policy now has a deductible of over $1,000 for an individual, and maybe $2,000 for a family, and most people don't have that amount of cash in the bank," Cutler said. "It's a big hurdle. People look at their cost-sharing, and they say this is a lot of money, I'm not sure I can afford it, so they're cutting back on discretionary imaging, they're cutting back on elective surgeries, and on referrals to specialists that might not be covered.

"At the same time, insurers have become a lot smarter about directing people to cheaper alternatives when you do seek treatment," Cutler added. "For example, it used to be that everyone took the branded version of a drug. Now, if you're taking the branded version of a drug, you've gone out of your way to do that."

Ultimately, Cutler said, the question of whether earlier estimates of health care costs are correct will depend on whether insurers, providers and the public continue to work to keep costs under control.

"Don't think of this as plate tectonics, where the Earth's crust is moving and we just need to figure out how fast it's moving," Cutler said. "We have a lot of control over this, through policies in the Affordable Care Act and Medicare and Medicaid. It's not easy -- no change is ever easy -- but if we continue to do the right things, like stressing efficiency and helping people choose less expensive alternatives, then we can make sure this trend continues."


Contact: Peter Reuell
Harvard University

Related medicine news :

1. Chemotherapy proves life-saving for some leukemia patients who fail induction therapy
2. National poll: Low cost, lifesaving services missing from most older patients health care
3. Life-saving primary PCI rising in Stent for Life countries
4. Aurora Dentist Gives Patients Big Savings With Teeth in a Day Implants
5. Popularity Causing Several Week Lag In Delivery Of 'Plug In' Device To Start Saving On Electricity Between 8% and 20%
6. New Home Energy Savings Device Poised to Help Thousands Succeed Working from Home
7. Dont cut lifesaving ICDs during financial crisis, ESC warns
8. What do saving money and losing weight have in common?
9. Saving brains in developing countries: $11.8 million for innovative ideas worldwide
10. Penn Medicine contest maps 1,400 lifesaving AEDs via crowdsourcing contest fueled by smart phones
11. Life-saving epinephrine under utilized by paramedics
Post Your Comments:
(Date:11/25/2015)... ... ... “While riding the bus, I saw a passenger in a wheelchair drenched from ... a convenient and comfortable way to protect them from bad weather, so I invented ... during cold or inclement weather. In doing so, it ensures that the user remains ...
(Date:11/25/2015)... , ... November 25, 2015 , ... ... (PHA) announces the nation’s Periwinkle Pioneers, individuals and groups responsible for advancing care ... disease. The Periwinkle Pioneers, nominated by the public, will receive special recognition throughout ...
(Date:11/25/2015)... ... November 25, 2015 , ... An unlikely combination ... in a way for homeless people to have a more dignified and comfortable ... initiative whereby they are repurposing plastic bags into sleeping mats for the homeless. ...
(Date:11/25/2015)... ... November 25, 2015 , ... ... focused on providing comprehensive solutions involving adult stem cell therapies to patients with ... deemed the “Regenestem” name as a Registered Trademark (RTM). , Organizations are required ...
(Date:11/24/2015)... ... 2015 , ... Genesis Chiropractic Software helps practice owners automate ... between the practice owner and the patient that automatically manages all five aspects ... Click here to learn more. , According to Dr. Brian ...
Breaking Medicine News(10 mins):
(Date:11/25/2015)... , November 25, 2015 Kitov ... ) (TASE: KTOV), a biopharmaceutical company focused on the ... various clinical conditions, today announced the closing of its ... Shares ( ADSs ), each representing 20 ordinary shares ... 3,158,900 ADSs. The ADSs and warrants were issued in ...
(Date:11/25/2015)... , Nov. 25, 2015 Allergan ... pharmaceutical company, and Rugen Therapeutics, a start-up  biotechnology ... for unmet CNS disorders and funded by the ... they have entered into an exclusive collaboration to ... for Autism Spectrum Disorders (ASD) and Obsessive Compulsive ...
(Date:11/25/2015)... Israel , November 25, 2015 ... "New Investors"), pursuant to which BioLight and the New ... IOPtima Ltd. subsidiary ("IOPtima") via a private placement. The ... of its innovative IOPtimate™ system used in the treatment ... approval pathway process for the IOPtimate™ system with the ...
Breaking Medicine Technology: