Cost of health care yet to be addressed

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During the National Association of Chain Drug Stores’ Pharmacy and Technology Conference at the end of August, Steve Anderson, the organization’s president and chief executive officer, was heard to say that when it comes to health care reform he used to think we were in the fourth inning of a nine-inning game. Now it looks like it’s only the second.

Anyone who questions the accuracy of Anderson’s assessment should take a look at a report in the new issue of Health Affairs that contains a sobering assessment of the projected cost of health care in the wake of passage of the Affordable Care Act.

Written by Andrea Sisko, an economist in the office of the actuary at the Centers for Medicare and Medicaid Services (CMS) and four of her colleagues there, the article, “National Health Spending Projections: The Estimated Impact of Reform Through 2019,” concludes that the legislation will have little impact on health care spending over the course of the next decade.

The researchers found that, despite passage of the landmark legislation earlier this year, not much has changed in terms of how many financial resources the nation will devote to health care.

Before the reform bill was enacted, previous work by the same authors estimated that spending in the sector would rise from $2.5 trillion, or 17.3% of gross domestic product, last year to $4.5 trillion, or 19.3% of GDP, in 2019. Their new study, which takes the reform act as the variable and retains previous assumptions about other factors driving health care costs, estimates such expenditures will grow to $4.6 trillion, or 19.6% of GDP, in that time frame.

Some proponents of health care reform may be satisfied with those figures, since, if all goes according to plan, 32 million Americans who currently do not have health insurance will get it by 2014, when the major provisions of the legislation take effect. The Affordable Care Act does indeed do a good job of expanding access to care; where it falls short is cost containment, which was supposed to be the other pillar of a revamped health care system.

Concerns about rising costs were what brought the issue to prominence in the first place. During the last several election cycles candidates were forced to focus on health care by stories about senior citizens on a fixed income having to choose between food and medicine, instances of family finances ruined by a catastrophic illness and business leaders who warned that the high cost of health care put U.S. companies at a competitive disadvantage in an increasingly globalized marketplace. As the CMS officials make clear, in that respect little has changed.

The failure of Congress and the Obama administration to, in the argot of Washington, “bend the cost curve” means that retail pharmacy operators should be ready for the long haul in terms of political advocacy. With the bleak fiscal prospects of governments at all levels exacerbating what was already a seemingly intractable problem, calls for meaningful cost-cutting measures are inevitable, and experience has shown that pharmacy is one of the first places policy-makers turn when looking to reduce health care expenditures.

The current plight of pharmacy operators in many Canadian provinces could be a preview of what lies ahead in this country. Ontario, which has set the pace for other provinces, abruptly slashed reimbursements for generic drugs, costing pharmacies in the province an aggregate total of hundreds of millions of dollars a year. The move has left drug chains there, which had every intention of helping the professionals in their stores take on a significantly bigger role in health care, struggling to balance the books.

Government policy still has a greater impact on health care in Canada than it does in this country. But with federal, state and local jurisdictions already responsible for some 50% of the U.S. health care bill through direct payments and tax subsidies and their involvement growing as a result of the reform legislation, there is no end in sight to the political and policy battles involving the industry.

Republicans, who have talked about amending or even repealing the Affordable Care Act, are poised to make substantial gains in the November elections, and it appears that the lawsuit challenging the legislation filled by 20 states will go forward.

Anderson was certainly right when he said that there was still a lot of baseball to be played. He might even have predicted, with a high degree of confidence, that the game will go into extra innings.


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