Federal Healthcare Costs Estimated at $2.6 Trillion Less Than Originally Expected

A new study from the Urban Institute suggests that U.S. spending on healthcare may turn out to be significantly less than originally anticipated five years ago — as much as $2.6 trillion less, as a matter of fact.

In 2010, the Centers for Medicare and Medicaid Services estimated that federal healthcare expenditures would amount to $23.7 trillion between 2014 and 2019. The Urban Institute and the Robert Wood Johnson Foundation, which funded the current study, now revise those projections to a lower $21.1 trillion by 2019.

“When CMS originally made those projections, they really thought the slowdown in health-care spending [growth] was mostly due to the recession, and afterward we’d see a return to the higher rates of spending growth — and that didn’t really happen,” Katherine Hempstead, a senior adviser for the Robert Wood Johnson Foundation, told the Washington Post.

Additionally, the 2010 predictions were made before the passage of the Affordable Care Act, which expanded healthcare coverage and subsidies to many U.S. citizens. Instead of raising costs, however, many of the reforms included in the bill, such as financial penalties for hospitals with high rates of readmission, seem to have helped stem superfluous spending.

Hempstead also pointed to the increase in high-deductible policies as another potential factor in the lowered cost projections. Patients who have to pay for a certain amount of treatment costs up-front are likely more apt to choose a low-cost visit to an urgent care clinic, where treatments average less than $150 per visit, than they are to make an unnecessary trip to the emergency room, where average expenses total $1,500.

As the American economy manages to eke its way out of the Great Recession, spending costs have remained relatively stagnant in the health sector, even as other industries witness increasing growth.

“The reality is there really has been a moderation in the rate of spending growth in healthcare,” Hempstead said. “It could be that we’re really entering a new era.”

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