Earlier this week, the Congressional Budget Office released its 2014 long-term budget outlook, which projects federal debt held by the public will rise during the next 25 years to the highest percentage in the country's history since just after World War II.
Part of the report examined healthcare spending. Here are four things to know from the report on excess healthcare cost growth.
1. When analyzing healthcare spending, the CBO calculates spending growth per person relative to the growth of potential gross domestic product per person, discounting the effects of demographic changes (such as age distribution) on healthcare spending. The resulting ratio is called excess cost growth. This doesn't necessarily imply that the growth is undesirable but simply reflects how much the growth in spending outpaces growth in potential output per capita, according to the CBO.
2. Excess cost growth rates are "quite variable" from year to year and have ranged from 0.1 percent to 1.9 percent for various parts of the healthcare system during various multiyear time spans during the last several decades, according to the CBO. However, in general, excess cost growth has declined during the past few decades. Excess cost growth overall drops from 1.9 percent for the time period of 1975 to 2012 to 1.1 percent when calculated from 1990 to 2012.
3. The slowdown likely resulted at least partly from private health insurance shifting away from indemnity policies (which usually reimburse enrollees for their incurred medical costs) toward greater management of care. Additionally, starting in the 1980s, Medicare shifted to fee schedules that constrain price increases from cost-based and charge-based reimbursement, according to the CBO.
4. Medicaid has shown the biggest slowdown in excess cost growth, from 1.5 percent from 1975 to 2012 to 0.1 percent from 1990 to 2012. Medicare experienced a less dramatic deceleration, from 1.9 percent to 1.2 percent during the same respective time periods.
More Articles on Healthcare Spending:
The Distribution of Healthcare Spending in 2012: 6 Key Statistics
The History of Healthcare Spending Growth: 3 Key Takeaways
CBO Releases Long-Term Budget Outlook: 5 Things to Know About Federal Healthcare Program Spending