An Unhealthy America: The Economic Burden of ... - Milken Institute

An Unhealthy AmericaMilken InstituteProjections for Health-Care Cost GrowthAssumptions for Health-Care Cost Growth in the Baseline ScenarioFor the baseline scenario, we assume that health-care cost growth will follow projections of the Centers for Medicareand Medicaid Services (CMS). 45 Implicit in the CMS projections are a broad range of complex assumptions about futurehealth-care cost growth, including trends in specific sectors and changes in public and private insurance coverage. 46To make disease-specific expenditure projections, we adjust the CMS-projected inflation rates to account for futurecosts associated with four specific sites of service (again, we use 2003 MEPS data). The four sites of service include (1)outpatient and office-based visits; (2) home health care; (3) prescription drugs; and (4) hospital inpatient visits, includingemergency room services.Assumptions for Health-Care Cost Growth in the Optimistic ScenarioHealth-care cost growth for the “optimistic” scenario is 0.5 percentage point lower than that in the baseline projections.This is a plausible reduction in cost growth as there are a number of trends that could have a moderating effect onhealth-care cost growth.For example, more widespread breast self-examination or improved diagnostics would catch breast cancer at an earlierstage, when less-aggressive treatments are available, and reduce the growth in expenditures to treat patients. In thecase of asthma (included in pulmonary conditions), improper management can lead to frequent hospitalizations andresult in higher treatment expenditures. Improved disease management of diabetes can lessen the risk factors fordeveloping cardiovascular disease and other conditions.Notably, while the baseline scenario assumes some growth of disease management, more widespread adoption of carecoordination and disease management could reduce the rate of future growth of health-care costs. If greater advancesin these areas are achieved, slower growth in health-care costs and treatment expenditures would be possible. Similarly,efforts to improve adoption of health-care information technology could reduce clinical and administrative componentsof health-care costs.45. The CMS projects a “personal health care” price deflator, which is its overall rate of inflation for the private healthsector. The CMS does not report medical cost growth by site-of-service”. To estimate medical cost growth for our fourcategories—outpatient and office based visits; home health care; prescription drugs; and hospital inpatient visits,including emergency room services—consistent with the CMS projection of overall medical inflation, we extracthistorical data and projections for specific health-care price indexes from Global Insight.46. Christine Borger, Sheila Smith, Christopher Truffer, Sean Keehan, Andrea Sisko, John Poisal, and M. Kent Clemens,“Health Spending Projections Through 2015: Changes on the Horizon,” Health Affairs, Vol. 25. February 22, 2006, pp.w61–w73.[ 90 ]