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FORECAST: Slowdown in hospital spending growth expected

Implementation of the Affordable Care Act (ACA) is intended to reduce the growth in hospital costs for Medicare patients directly, but this study analyzed the potential for associated decreases in costs due to the “spillover” effects related to lower utilization by non-elderly patients.  The analysis was based on data from 1995 to 2009.  Here is a nice brief summary of how Medicare reimbursement policy has affected costs over time.  This is a direct quote:

…Medicare, when first implemented, spurred broad increases in hospital capacity, with large spending spillovers among the nonelderly.  Our results describe a similar spillover but in reverse.  Medicare’s impact on the broader health system seems to depend on how Medicare pays providers.  In the 1960s and 1970s, Medicare paid hospitals very generously, and so the implementation of Medicare spurred spillover increases in spending and utilization among the nonelderly.  Over the period of our study, Medicare kept tight constraints on hospital payments, and those Medicare constraints appear to have contributed to falling inpatient hospital utilization rates among the nonelderly.  (pages 1592-1593)

The author, who is with RAND, concludes that the changes in Medicare due to the ACA will “slow the growth in hospital spending to a larger degree than has been projected.”

Source: White, C. (2014, October). Cutting Medicare hospital prices leads to a spillover reduction in hospital discharges for the nonelderly. HSR. Health Services Research. 49(5), 1578-1595.  Click here for access to article: http://onlinelibrary.wiley.com/doi/10.1111/1475-6773.12183/pdf  Posted by AHA Resource Center (312) 422-2050, rc@aha.org

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