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Costs go up, costs go down. What does it all mean?

Two interesting data points about health care spending have emerged in the last week that, at first, may seem contradictory. Actually, though, they are entirely complementary, and both illustrate the need to continue efforts to control costs and improve quality in the health care system.

First was the publication of the latest findings from Oregon’s 2008 Medicaid expansion, showing that newly-covered Medicaid enrollees in that state used the emergency room even more often than they did before they got Medicaid. As a result, Oregon Medicaid’s spending on emergency services increased.

At first blush, that seems surprising and discouraging: isn’t insurance coverage supposed to keep people out of the ER and control costs?

But these initial findings make perfect sense. People who have been accustomed to using the ER and don’t have a relationship with a primary care provider or clinic are likely to keep going to the place they’re accustomed to; we’re all creatures of habit. It takes time to build new habits and learn to use the system appropriately if you haven’t been part of the health care system before (or not for a while). And, if you have trouble getting an appointment with a primary care provider, you’ll be even more likely to go back to the ER, because you know you’ll get in.

Nor is it surprising that costs would go up at first. Bear in mind that, when previously-uninsured people get Medicaid coverage, they use more services – because those services are less expensive to them in terms of out-of-pocket costs.

Over time, health coverage will be a money-saver, if it enables people to get the care they need to keep little problems from turning into big ones or prevent health problems from occurring in the first place. But at the beginning, you’ll see the impact of pent-up demand and costs will go up.

That brings us to the second interesting data point of the week: new figures from the Centers for Medicare and Medicaid services show that health spending rose by less than 4 percent in 2012, the second year in a row in which health spending’s share of the economy shrank. It’s a marked change from decades in which increases in health spending outpaced income growth.

While some have been tempted to use this as evidence of the Affordable Care Act’s impact, that would be a fallacy. Most ACA provisions are only just now starting to take effect. And, when they do, we will likely see the rate of spending speed up, just as it did in Oregon. That’s because much of the ACA is predicated on coverage expansions, both for Medicaid and for commercial health coverage through the subsidies connected to the exchanges. Remember, as illustrated above, coverage costs money. It’s more likely that this recent slowdown in health spending reflects the lingering impacts of the Great Recession.

Being a glass-half-full person, though, I believe that even when we see the rate of increase in health spending tick back over the 4 percent mark, we can keep it from growing as fast as it has in many previous years. BUT – only if we maintain momentum on reforming health care payment and delivery.

If we accelerate our movement away from paying for value and toward paying for outcomes; if we continue to focus on creating more coordinated systems of care that minimize duplication of services and enhance quality; if we minimize the use of products, services and technologies that don’t improve outcomes; if we empower patients to make good decisions; if we look at health care as part of a larger ecosystem and address the social determinants that affect people’s use of health care services; if we focus on these things, we can control costs.

Coverage is critically important, and thank goodness the Affordable Care Act emphasizes it. But it’s only part of the answer to our country’s health care needs. Let’s keep our eyes on the rest of the prize, so that our newly-insured can enjoy the benefits of a more efficient system.

About the Author: Edie Sonn is CIVHC's Interim CEO and Vice President of Strategic Initiatives. Contact her at

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