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2011 Wrapup

By December 30, 2011Commentary

At the end of each year there is a natural tendency to want to analyze the time period as a discrete unit, even though years are arbitrary human demarcations on the order of time.  Every year is momentous for health care, as it is a fundamental human concern and a very large part of our economy.  This year and the past two years have been especially significant because of the very controversial health reform process and outcome.  2011 endured some of the early effects of this law, most were not positive.  Although growth in health spending and health insurance premiums has slowed slightly, on a real basis, that is, as compared to inflation or even GDP growth, the increase is very high.

The reform law appears to be responsible for at least some of the growth in insurance costs, as required coverages and benefits add to expense, but the MLR requirement may have a moderating effect for a year or so.  The law has added enormously to administrative expense for providers and insurers, with a plethora of long and complex regulations.  A number of the experiments promoted or facilitated by the law, such as ACOs, value-based purchasing, pay-for-performance, medical homes, bundled payments and comparative effectiveness, are moving along, but it is too early to decipher the effects.  It is, however, highly unlikely that these will have the impact on costs that their proponents suggest.

The health IT revolution continued at high speed in 2011, facilitated by increased venture investing in the area.  This too, however, has shown limited impact.  Provider consolidation also continues apace, with hospital acquisitions of medical practices and other provider types leading the way, but interestingly, with a strong pickup in payer acquisition of providers or provider service entities.  Consolidation inevitably leads to greater market power, which probably is inimicable to greater cost control.  While many drugs are going generic, most notably Lipitor, the pipeline is full of very expensive specialty drugs.  So while 2011 was a year of hope in terms of cost control, not much really changed and we will see if any of the many initiatives bear fruit in 2012

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