Public Assets Institute > Policy Areas > Health Care > Health care costs: Bending the growth curve is good

Health care costs: Bending the growth curve is good

It’s an election year in an era of divisive politics, so the campaign-style attacks on Vermont’s health care reform efforts probably shouldn’t be surprising. And from what we’ve seen on the national political stage, we know that campaign ads don’t have to make sense.

Still, why would anyone want to convince Vermonters there was something wrong with bending the curve on health care costs—that is, reducing the long-term growth rate? Recent radio ads have been dismissive of slowing the growth of health care expenditures and have criticized the Shumlin administration for acknowledging that overall costs will continue to go up even with reform.

There are two things that determine the size of our annual health care bill: the number of people receiving care and the cost per person. The cost per person in the United States is much higher than other developed countries. But even if reform succeeds in bringing down this half of the equation—through lower administration costs, reducing unnecessary procedures, promoting healthy living—total spending on health care will continue to grow because the population is growing and the big Baby Boom generation isn’t getting any younger.

According to the most recent analysis by the Joint Fiscal Office and the newly renamed Department of Financial Regulation, without reform, the amount we spend on health care for Vermont residents will rise an average of 7 percent a year—doubling from roughly $5 billion in 2010 to $10 billion in 2020. With reform, the analysis found, our health care bill in 2020 could be cut between $500 million and $2 billion. The higher estimate would mean about a 20 percent savings from what we can expect to spend without reform.

Lowering the total costs to around $8 billion by 2020 also would mean that health care cost growth was more in line with the state’s long-term economic growth. Health care would still be growing faster, but moving toward a more sustainable rate. And that’s one of the things health care reform needs to do: bend the growth curve of health care expenditures so they don’t continue to eat up more and more of our income every year.

No one ever promised that after reform our health care expenditures would go down every year. If you hear anything different, assume it’s just a campaign ad.


Posted by Jack Hoffman on April 25, 2012 at 9:32 am

3 Responses to “Health care costs: Bending the growth curve is good”

  1. Catherine Thomas says:

    It is also important to note that with the single payer system our legislature has put us on the path to implement (Green Mountain Care) we will actually have a unified system of health care, which we don’t have now. We will be able to study outcomes, evaluate our progress and continue to work toward cost containment and using what we spend on health care in a smart way instead of having no control over overuse of medical care, underuse of best practices, not enough of promoting wellness, etc. The need to have something as complex and essential as health care provided in a unified system of care is well documented worldwide.

  2. walter carpenter says:

    Good point about one unified system. All we have now is a fractured mess that competes with each other and whose only purpose seems to be to prop up the major insurance companies.

  3. C Beaudette says:

    Vermont remedied it’s inequality in education spending per town with a socialistic solution and a central government administration. We now spend $17,500 per student, more than any state in the USA or country in the world with the same resulting test scores as the rest of the Northeast states…..for as Catherine suggests it is now easy to ascertain that our expensive education is just as mediocre as our neighboring states who spend $11,000. Forgive my skepticism, but I am not ready to accept State modification of health care for the benefit of reduced costs. MA bought that argument and I was told just yesterday that the State either has to repeal Romney Care or revert further along the line of Marxism to price controls. Vt leaders are so arrogant to think we can do better than MA. but if our education is any indication, I really don’t think so.