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Health costs break from economic trend as Obama law gains speed

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By Alex Wayne
Bloomberg News
WASHINGTON -- Provisions in the Affordable Care Act that penalize hospitals for excessive readmissions and encourage employer wellness programs are slowing the growth of medical costs.
Health-care costs for commercial insurers and employers are expected to rise about 4.5 percent next year, a percentage point less than projected for 2013, after accounting for changes in benefits, PricewaterhouseCoopers reported Tuesday.
The report supports President Obama's contentions that the 2010 law has contributed to historically slow cost growth. The findings track with studies by the government and others that show continued slow growth in medical costs.
The report cited the positive effect of provisions that reduced hospital readmissions by 70,000 in 2012 and lowered premiums for people in employer-sponsored smoking cessation or chronic-disease management programs.
"It's picking up speed and force," said Ceci Connolly, managing director of PwC's Health Research Institute in Washington. Provisions such as the readmission penalties "will be having a measurable impact across the health system."
Employers are encouraged under the law to vary insurance premiums based on whether workers participate in wellness programs, and hospitals that re-admit too many patients within 30 days of a discharge face Medicare payment penalties.
The Centers for Medicare and Medicaid Services said in January that U.S. health spending, including from government programs, rose 3.9 percent in 2011, matching the slowest growth in 52 years of record keeping.
"Historically, medical inflation jumps after the nation recovers from a recession," PwC said. "But changes in how the industry operates and how average consumers choose health care appear to be having a more sustained effect."
Wal-Mart Stores, Lowe's and other large employers reported some success in reducing costs by sending workers to prominent "high-performance" hospitals such as the Cleveland Clinic for major procedures including heart surgery, PwC said.
Connolly said the employers may be saving as much as 25 percent on the cost of the care, even after paying for travel. The companies benefit because their workers get more reliable diagnoses and suffer fewer complications, requiring less follow- up care, she said.
While companies and consumers can expect to benefit from slower growth, it places "added tension on the health industry," Connolly said.
"There will certainly be health-care organizations that thrive in this pressure-cooker of an environment and there are others that are very much challenged by it," she said. "Relying solely on volume in the future will not be a winning strategy in the health-care world."
Hospitals should instead be collecting data on the quality of their care and on their patients' outcomes to show insurers and large employers that their services are more valuable than competitors', Connolly said. Stand-alone community hospitals that can't prove the value of their care may suffer as employers and insurers divert patients to institutions better able to track the data.

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