White House touts slow increase in health care costs

Kelly Kennedy | USA TODAY

WASHINGTON — Personal health care costs rose in the 12 months ending in May at the slowest rate in the last 50 years, as spending on hospital and nursing home services declined, the White House announced Monday.

Personal consumption spending rose 1.1%, Alan Krueger, chairman of the White House Council of Economic Advisers, said. Hospital readmissions rates dropped from an average of 19% to 17.9% for Medicare patients since the passage of the 2010 health care law, Krueger said.

A series of recent government reports and industry analyses have shown a decrease in overall health care costs. In May, a Congressional Budget Office report showed a $618 billion drop in projected Medicare and Medicaid spending over the next decade. A recent study by the Department of Health and Human Services (HHS) showed that for Americans who receive health insurance through their employers, premiums rose 3% from 2011 to 2012, the lowest increase since 1996.

The law is not affecting job growth, Krueger said. Job growth in industries that have traditionally not provided health insurance for their employees, such as restaurants, was higher. Restaurant sales and employment have increased more than any other retail sales industry since the law was signed, at about 11% for employment and 17% in retail sales, and weekly hours also have grown about 3% since the law was signed.

"Data from across the economy — covering consumers, government and private employers — point to the same conclusion," Krueger said. "Health care cost growth has slowed."

"The good news is that increased customers means that the economy continues to be the primary driver of employment," said Helen Darling, CEO of the National Business Group On Health, which has criticized the law. "Americans are feeling better about the economy so are eating out more and shopping more, compared to the Great Recession. This is good news for the country but this doesn't mean we don't need to actively control health costs or we can relax."

Krueger pointed to several changes that have taken place since the health care law was enacted as reasons why costs are going down, though officials have acknowledged the slow economy played a large part.

Even so, rehospitalization rates for Medicare patients have dropped because of penalties for hospitals that readmit patients within 30 days; accountable care organizations have changed from billing per procedure to sharing in savings they achieve by avoiding duplicate tests and unnecessary procedures; and hospitals receive reduced payments for poor performance because of the law.

"The law includes provisions intended to foster coordinated care, reduce preventable health complications during hospitalizations, and promote the adoption of more efficient health information technology," Krueger wrote.

President Obama told The New York Times this weekend that support would come as the 2010 health care law is implemented, a hope that Americans will like the law's benefits when they take effect.

Obama has focused recently on the parts of the law have taken effect, such as the ban on out-of-pocket costs for preventive health exams, rebate checks from insurance companies that spent less than 80% of premiums on health care and drug discounts for beneficiaries of the Medicare Part D program. Also, people up to age 26 can remain on their parents' health insurance plans.

Congressional Republicans remained unswayed by the White House claims. They are voting in the House of Representatives this week to repeal parts of the law. It is their 40th attempt to repeal, change or defund the law. The bill is not likely to make it to the Senate.

As the administration works to gain 7 million new people to purchase private insurance through the federal and state health marketplaces, or exchanges, beginning in October, they have stressed that their message has been streamlined to those who need insurance. To that end, they are appealing to young, mostly Hispanic Americans in Florida, California and Texas.

In other words, middle-class Americans living in Idaho and covered by employer-sponsored insurance probably won't see advertisements for the new insurance programs.

Meanwhile, states that have released the rates insurers provided for the policies to be sold on state-sponsored health exchanges have rates that turned out to be lower than expected.

On Friday, Maryland announced insurance premiums up to 33% lower than expected. Connecticut's plan includes an insurer that announced it would drop premium costs an average of 36% below its original proposal. And young people in Nevada will be able to buy catastrophic coverage for less than $100 a month. California and New York also have lower-than-expected rates.

An HHS report showed that silver health exchange plans, or the lower cost plans that uninsured people are most likely to buy, are already an average of 18% lower than expected in the 11 states the government looked at.

Not all states are reporting lower rates. Republican Indiana Gov. Mike Pence, who opposed the health care law while a congressman, released preliminary statistics showing rates would be 72% higher than current plans. But those numbers lumped all four categories of coverage together, including premium plans. The Society of Actuaries estimated that underlying claims costs could go up by an average of 32% by 2017.