|Anticipating faster growth in healthcare spending
This week, actuaries at the Centers for Medicare & Medicaid Services (CMS) released their annual National Health Expenditure (NHE) projections, covering the period 2017 to 2027. The report forecasts average annual growth of 5.5 percent in total health spending for the coming decade and predicts that healthcare will account for nearly 20 percent of US gross domestic product (GDP) by 2027. CMS actuaries anticipate a faster rate of growth for the next ten years than has been experienced in the years since the Great Recession (3.9 percent per year for 2008-13), and post-Affordable Care Act (ACA) coverage expansion (5.3 percent per year for 2014-16). The report cites higher prices for care, greater use of care, rising drug prices, and the aging Baby Boom generation as key drivers of the expected increase in health spending over the coming decade. Spending on Medicare is expected to grow fastest among payer categories, growing 7.7 percent per year as the Boomer generation enters the program.
The actuaries’ projections are likely to add ammunition to calls for more radical steps to overhaul the nation’s healthcare system, which are gaining steam as the 2020 Presidential campaign gets underway. Yet the forecast provides talking points for both sides: Republicans will point to the projected acceleration of Medicare and Medicaid spending as evidence of the need to restructure the public insurance programs, while Democrats will surely focus on healthcare’s growing share of GDP and the rise in household spending on care as reasons to expand government coverage programs that promise a greater ability to clamp down on rising prices. The projections are not uncontroversial; several policy experts point to past dire predictions of the imminent acceleration of health spending, which did not come to pass, as evidence that ACA payment reforms have had a permanent impact on the trajectory of health spending. A recent Urban Institute report, for example, makes the argument that private insurance, rather than Medicare and Medicaid, ought to be the primary focus of further payment reforms, given the relative success of the government programs in curbing spending growth. However accurate the latest forecasts prove to be, it’s clear that the growing burden of health spending on households, businesses, and the government have become an urgent problem to be addressed and will surely be at the center of the policy debate for years to come.
Free tuition for graduates of a new medical school
On Tuesday, Oakland, CA-based Kaiser Permanente announced that it planned to waive tuition for the first five classes to enroll in its planned medical school, slated to open in 2020 in Pasadena. According to Mark Schuster, the dean of the Kaiser Permanente School of Medicine, the annual tuition of $55,000 would be paid for using a portion of the money Kaiser sets aside for “community benefit” spending, which allows the company to operate under not-for-profit status. Beyond the first five classes, Kaiser plans to offer tuition assistance to enrollees. Each 48-student class at the new medical school, which the company first announced in 2015, will be schooled in Kaiser’s integrated model of care delivery, instead of following a traditional curriculum. Instruction will focus on team-based, technology-driven care, intended to teach a new model of care delivery for the next generation of doctors. Kaiser’s tuition-waiver announcement comes a year after New York University announced its own plans to offer free medical school enrollment, although that program is largely to be funded by a philanthropic donation from the founder of Home Depot, Kenneth G. Langone, for whom the school is named.
In announcing the tuition-free program, the dean of Kaiser’s medical school cited a desire to encourage graduates to pursue medical practice in whatever areas of specialty interest them, rather than seeking to specialize in lucrative sub-specialties in order to be able to pay down medical school debt. In particular, the Kaiser school has been touted as a “population health” program, which will produce graduates who will work in primary care settings that allow them to reduce patients’ use of high-cost care. That argument—that eliminating the burden of medical school debt will shift specialization patterns among graduates—encountered considerable skepticism among economists and policy analysts following the NYU announcement last year. It remains to be seen what the impact of such initiatives will be; surely Kaiser’s implicit argument that free tuition is a “community benefit” will hinge on evidence that its graduates truly are pursuing work in less-lucrative, more community-oriented settings.
More evidence of a crisis in rural healthcare
A new report from the consulting firm Navigant highlighted the dire state of rural healthcare in the US, estimating that 21 percent of rural hospitals across the 43 states researchers analyzed are at “high risk of closing”. Among those 430 high-risk hospitals, the report found that 64 percent provided “essential” services to their communities, either by providing trauma services, serving a high share of low-income patients, being the sole provider in an isolated region, or having an outsized impact on the economic status of the community. Plains states and states in the Southeast were found to be at highest risk for losing their rural hospitals. Among the factors cited by Navigant as most challenging for rural hospitals were poor payer mix, excess capacity, and difficulty in accessing innovative clinical and digital technologies. The study’s authors pointed to proposed legislation sponsored by Senators Chuck Grassley (R-IA), Amy Klobuchar (D-MN), and Cory Gardner (R-CO) as a promising remedy to the plight of rural hospitals, allowing them to streamline services and skirt regulatory requirements that require the hospitals to maintain unused capacity. The authors also suggested that rural hospitals may need to seek network affiliations with tertiary, academic centers, which could provide a lifeline to the struggling facilities.
There are surely no easy remedies for the problems plaguing rural healthcare in the US. While access to essential healthcare services must be maintained even in remote communities with declining populations, that access must be weighed against the safety and cost challenges of operating full-service hospitals with low volumes and difficult staffing situations. The Navigant consultants are spot-on: one promising path forward is for rural facilities to partner with larger regional referral centers and larger health systems that can improve access to technology and financial support. Telehealth providers should also play a much larger role in rural healthcare, as should scaled-down care models like microhospitals and rural freestanding emergency centers. We’d add one additional thought: is there a role in rural healthcare for retailers who have targeted rural, lower-income populations for their own service strategies? Walmart is an obvious candidate here, given their national footprint, but we wonder whether low-budget retailers like Dollar General and Dollar Tree might have a part to play as well. Often castigated for their focus on cheap, subsistence goods, these stores could be ideal locations for clinic and telemedicine offerings to fill the growing gaps in rural access to care.