The passage of the Affordable Care Act (ACA), also known as ObamaCare, spurred many controversies. One of the biggest was what the impact of the law would be on health care costs. Some observers were concerned that eliminating exclusions for pre-existing conditions and giving more Americans subsidized access to care would drive up costs. However, the law contains many elements that encourage both doctors and patients to keep costs low.

Concerns About Higher Costs

It takes time to understand exactly what health care costs are doing to the industry landscape, and current numbers available for 2014 and 2015 are only estimates. PricewaterhouseCoopers, or PwC, estimates that 2014 will show 6.5% growth in health care costs while 2015 will show 6.8% growth. The largest areas of spending are expected to be inpatient care and professional services.

There are many factors that affect growth in health care costs. One of the clearest is the continuing recovery of the economy. As Americans see their financial position become more favorable, they are more likely to spend money on additional health care options. More money will be spent as more Americans gain health insurance, but that doesn’t necessarily mean per person spending is increasing. The economic recovery causes many costs to rise across all sectors.

Another factor influencing health care costs is the continued increase in the development and costs of specialty drugs. Specialty drug costs are expected to rise 121% between 2012 and 2016 and an additional 109% between 2016 and 2020. As these drugs get more expensive and more Americans need them, health care spending can be expected to increase accordingly.

Keeping Costs Low

The PwC research shows that enrollment in employer-sponsored high-deductible plans has tripled since 2009. As a result, employees are shouldering more of the health care costs themselves. It’s been shown that as employees handle more of their own costs, they receive fewer services and make less-expensive care decisions. Some observers worry that these decisions will result in employees failing to receive needed care, increasing health care costs over time.

There are other costs controls in the ACA as well. The state insurance Marketplaces created by the law help introduce managed competition into health insurance in the private and small group markets. This competition encourages companies to keep their premiums low in order to draw in new customers. The only way to do that is to find creative ways to keep costs down.

The ACA also introduced the idea of Accountable Care Organizations, a pilot program where a group of providers can work together to improve the care and manage the costs of a population of patients. If high quality care is provided at a lower cost, the group gets a share of the savings. Outside the Accountable Care Organization framework, providers are generally paid based on the volume of services they provide, not the value of those services. With the ACA, there are incentives in place to improve quality of care, which will directly impact the cost of health care.

The jury is still out the long-term effects that the ACA will have on the cost of health care, but estimates show that 2015 will be slightly higher than 2014, which may not be directly attributable to the ACA. Whether the incentives for lowering cost pay off or simply create gamesmanship remains to be seen.

Sources:

http://www.pwc.com/us/en/health-industries/behind-the-numbers/

http://www.pwc.com/en_US/us/health-industries/behind-the-numbers/assets/hri-behind-the-numbers-2014-chart-pack.pdf

http://www.washingtonpost.com/news/storyline/wp/2014/10/06/we-know-how-to-expand-health-care-we-know-a-lot-less-on-how-to-make-it-cheaper/