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April 16, 2014 1:09 PM The Awful Specter of a New Health Care Cost Spiral

By Ed Kilgore

If you want to remain anxious about something related to health care policy over the next few months, you’d be advised to focus not on the familiar Obamacare statistics of people covered or even short-term insurance premium trends, but on indicators that ol’ debbil, medical cost inflation, might be returning. Sarah Kliff has the basics from her new perch at Vox:

A four-year slowdown in health spending growth could be coming to an end.
Americans used more medical care in 2013 as the economy recovered, new reports show. Federal data suggests that health care spending is now growing just as quickly as it was prior to the recession.
“We’re at the highest level of growth since the slowdown began,” Paul Hughes-Cromwick, a senior health economist at the Altarum Institute, which tracks health spending. “You have to go back seven years to see growth like this.”
More health spending can sometimes be a good thing: it might reflect more Americans gaining health insurance and seeking out needed medical care as the economy recovers.
But it also present challenges for the government. More than a quarter of the federal budget already goes towards health programs. That number could rise if health care costs started growing faster than the rest of the economy again.

The cross-talk over resumed medical inflation reflects an older debate: was the four-year slowdown a product of the recession, or of the cost-containment features of the Affordable Care Act? And either way, is a new strategy for cost-containment urgently needed?

Any clear sign of renewed medical inflation will almost certainly lead both conservatives and progressives to ramp up the volume on their own prescriptions, with the former arguing for a more “market-oriented” system relying on competition among private actors (supplemented by disincentives to “over-utilization” of medical services) and the latter calling for a more aggressive public role in squeezing the profit margins of both providers and insurers. There could also be renewed attention to less prominently discussed cost-boosting factors, like the rapid consolidation of hospitals and other health care providers that the Washington Monthly’s Phil Longman warned would almost certainly touch off a cost spiral unless measures are taken to enforce antitrust laws and regulate providers much as we do “common carriers.”

The maddening thing, of course, is that Obamacare critics will blame the Affordable Care Act for any renewed medical inflation, even as they fight the very provisions—such as greater scrutiny of medical procedures, devices and pharmaceuticals reimbursed under Medicare—that might help bring and keep costs under control. Let’s hope the initial alarming numbers turn out to be premature, or just wrong.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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