ECONOMIC REPORT OF THE PRESIDENT

legislation that overrides the recommendations is enacted. Over the long
run, the target growth rate for IPAB is the growth rate of per capita GDP
plus 1 percentage point. However, a more stringent target was set for years
through 2017: the average of projected growth in the overall Consumer Price
Index (CPI) and the CPI for medical care. Because of the exceptionally slow
growth in Medicare spending since the ACA became law, which is discussed
in greater detail in the next section, IPAB has not yet been called upon to
make recommendations despite this stringent target.
Recent Trends in Health Care Costs and Quality
As the reforms described in the last section have taken effect, the
United States has seen exceptionally slow growth in health care costs, as
well as promising improvements in the quality of care patients receive. This
progress has been seen in every part of the health care system, including
both public insurance programs like Medicare and Medicaid and private
coverage. While the factors driving these encouraging trends are not fully
understood, there is clear evidence that the reforms introduced in the ACA,
together with other actions taken by this Administration, are playing an
important role. This section of the chapter provides a detailed description of
recent trends in health care costs and quality, as well as what is known about
the causes of these trends.
Recent Trends in Health Care Costs
Economists commonly focus on three distinct measures of health
care costs: unit prices; per enrollee spending; and aggregate spending. Unit
prices are the amounts paid for a single unit of a health care good or service,
such as a physician visit, a hospital admission, or a dose of medicine. Lower
unit prices, holding quality fixed, are unambiguously good for consumers
because they allow consumers to purchase the same medical care for less
money, leaving more money to purchase other valued goods and services.
Per enrollee spending refers to the average health care spending per
person enrolled in insurance coverage and is determined by both the unit
prices of health care and the average quantity of services used by enrollees.
Per enrollee spending is what ultimately determines what consumers pay
in the form of premiums and cost sharing. Slower growth in per enrollee
spending that reflects slower growth in health care prices is unambiguously
good for consumers, for the reasons described above. Slower growth in per
enrollee spending that reflects slower growth in utilization of services will
often benefit consumers as well, provided that slow growth is achieved without
worsening the quality of care.
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