HEALTH CARE SPENDING: Reax To HCFA Analysts’ Projections

At least one health care analyst is voicing "strong dissent" to a new study that predicts national health spending -- fueled by private-sector health spending -- will double over the next decade. John Gabel, director of the Center for Survey Research at KPMG Peat Marwick Main & Co., contends that "employers would not readily accept a return to" the levels of health care inflation predicted by a team of Health Care Financing Administration economists in a study published yesterday in Health Affairs (see CHL 9/14). Gabel said employers would use a number of strategies to hold down costs, including "stricter limits on outlays for prescription drugs." To cut drug costs, he said employers could become "more insistent that workers fill prescriptions with generic rather than branded drugs," and could "restrict the number and type of drugs approved for reimbursement." Gabel said, "Employers are price-sensitive. There are so many things they can do" (Rosenblatt, Los Angeles Times, 9/15). Along with the Congressional Budget Office, Gabel predicts that private health care premiums will not grow as fast as predicted by other analysts. "Since 1995, increases in premiums have been less than the increase in the gross domestic product," Gabel said, adding that he predicts "premiums to rise 4% to 5% a year in the coming decade" (Pear, New York Times, 9/15).

Other Views

HCFA Chief Actuary Richard Foster "said the key factor in the acceleration of private-sector spending is the 'tapering off' of working Americans' enrollment in managed care plans" (McGinley, Wall Street Journal, 9/15).
Brandeis University's Stuart Altman said the spending projections offered by the HCFA team may fall short of reality. "These are fairly conservative growth rates. The actual growths could be substantially higher" (Pham, Boston Globe, 9/15).
Kaiser Family Foundation President Drew Altman said of the HCFA projections: "It's the first major report that shows clearly that those who felt managed care would solve the health cost problem forever were living in a fantasy world" (Goldstein, Washington Post, 9/15).
A Boston economist predicted that the increased national health spending could be a boon to the Northeast's economy. "Lots of new jobs will be generated. The question is, what will those jobs look like?" said Paul Harrington of Northeast University's Center for Labor Market Studies (Boston Globe, 9/15).
American Association of Health Plans President Karen Ignagni said, "HHS' projections raise the question of what their cost projections would be in the absence of managed care. By all accounts, much higher. Clearly, a managed care model of health care delivery will be required for the foreseeable future" (AAHP release, 9/15).
The Department of Health and Human Services issued a release touting the beneficial impact of last year's Balanced Budget Act on health spending. The HCFA analysis showed that a projected slowdown in public sector health spending "is due primarily to substantial Medicare savings achieved" by the budget law (HHS release, 9/14).

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