Editor’s Note: In the Jan/Feb issue of Health Affairs, Paul Ginsburg, president of the Center for Studying Health System Change, offered a Perspective on the report on national health spending for 2006 by the Centers for Medicare and Medicaid Services Office of the Actuary. Ginsburg’s article, which warned, “Don’t Break Out The Champagne” in celebration of slower health spending growth, prompted a response on the Health Affairs Blog by Jeff Goldsmith, the president of Health Futures Inc. Below is Ginsburg’s reply to Goldsmith’s blog post.

My Perspective’s focus on factors that make significant further declines in the spending trend unlikely emphasized potential drivers of increasing spending. I was not predicting a substantial increase. But recent rates of spending growth, while not at peaks, are still above trends in earnings, adding cumulatively to the issue of affordability. The stability of the percentage of gross domestic product (GDP) spent on health care has been welcome, although a portion of that is from somewhat higher-than-average GDP growth. Now we are facing a year of very low GDP growth (if it is even positive), which will lead to percentage of GDP rising again. A recession will have some impact on spending, but the research on cycles in health care spending suggests that much of the impact of recessions is spread over many years. We may still have a portion of the impact of the recent boom to get through before getting to the point where the economy is suppressing spending trends. 

Much of Jeff’s discussion of areas where health care use is slowing is a valuable complement to my discussion of areas of likely further growth. The overall cost picture is the netting out of numerous factors that have positive and negative signs. Some of the most interesting areas that he raises are those where policy changes that lowered payment rates have had an impact on spending beyond the direct effects of lower unit prices. Perhaps these examples will be more effective in getting policymakers interested in devoting more political and staff resources to refining Medicare payment mechanisms than warnings of how overpaying for services generates more volume. The examples would have an even greater impact if they convinced budget scorekeepers to depart from assumptions of offsets of rate reductions. But the examples also will likely lead to more lobbying resources on the part of interests whose businesses are at stake to protect existing distortions. 

Tags: Spending