The latest healthcare spending news is in, and it's a surprise. Rather than going up 10 percent, as per Wall Street projections, healthcare spending actually fell 1.4% during the first quarter of this year, according to a Bureau of Economic Analysis report. Apparently, Wall Streeters thought that the implementation of the ACA would fatten up providers, but that just didn't materialize.
While it's not a catastrophe when Wall Street analysts get it wrong, it is worth asking what they missed. On the surface, their assumption that the ACA would boost healthcare spending sounds reasonable. But clearly, analysts missed something important.
Here's a few reasons they might have gotten it wrong:
- Rather than raising spending, the ACA may have actually reduced healthcare costs overall. In theory, when people get insurance and use it efficiently, they don't need to rely on expensive forms of care. Cutting down on needless emergency department trips and hospital stays could take a chunk out of healthcare spending.
- The ACA may cover 8 million people, but that still leaves out many millions more whose dollars are flowing to community health centers and other low-cost healthcare settings. Those 8 million simply aren't enough to move the needle as far as Wall Street had predicted.
- People are continuing to put off medical care in favor of the necessities. Simply being insured doesn't mean that patients aren't still struggling with their portion of the expense. So there may be no reason for healthcare spending to climb dramatically.
- The policies sold on the health insurance marketplace often include very substantial copayments, not to mention coinsurance, which may put non-emergency healthcare spending out of their reach. Sure, some people will take advantage of no-cost preventative services, but if they have to shell out the cash every time they see their primary care provider, many will simply refuse to do so.
Regardless of why it happened, this situation highlights the paradoxical situation we're in with healthcare. As things stand, lowering healthcare spending is good—and yet it can have a terrible effect on our economy. As The New York Times notes, lower-than-expected health care spending helped shrink the nation's overall GDP.
The White House has downplayed the decline, arguing that healthcare spending will accelerate again in coming quarters. But if the ACA policies don't reduce healthcare expenses enough to help more lower-income consumers access healthcare, that's just not going to happen.
As I see it, this situation highlights the folly of trying to fix a broken healthcare system by demanding that cash-strapped, unemployed or underemployed folks carry more of the burden than they already have been. If the government needs to spend more on healthcare to keep the sector (and its citizens) healthy, it's time to go ahead and do it. Wall Street will be happy, providers won't be forced to make desperate moves to survive, health plans will get more customers, consumers will get the care they need and the GDP will go back up. Everybody wins.
Unfortunately, given some legislators views', lowering deductibles and expanding ACA eligibility doesn't have much of a chance on either the federal or state level. But a girl can dream.