Medical Care Prices Fell for First Time in 35 Years

[ProSense]

Medical Care Prices Fell for First Time in 35 Years

By CATHERINE RAMPELL

<...>

According to a report released today by the Labor Department, consumer prices over all grew 0.3 percent in July, on a seasonally adjusted basis. The medical care index, however, fell 0.1 percent in July, after three and a half decades of constant increases.

To understand why this is such a big deal, let’s chart prior trends in health care costs. The first graph below shows the index value for all consumer items and for medical care alone. (The values shown refer to prices relative to their levels in 1982-84, which is set to an index benchmark of 100.)



<...>

Here is another graph that shows the month-over-month percentage change in the medical care index, adjusted for seasonality. Notice how many times the line dips below zero, which would indicate a month-over-month fall in prices:



Yep. In the last 40 years, the Labor Department reports that there are only three months in which medical care prices fell. Going back to 1947, the earliest year for which the department has these statistics, yields only an additional three months of medical care disinflation. So, in the last 63 years, this has happened exactly six times.

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[MannyGoldstein]

1. Good news!

Thanks!

[NJmaverick]

2. K&R

[MadHound]

3. Meanwhile, insurance premiums continue to rise

And with a mandated monopoly in the offering, they will continue to rise with no end in sight.

[karynnj]

9. Look at the Medical services component in the table from the first link

There are two medical components in the CPI. The first, which is for drugs and devices went down .2% from the month before.
The other category includes professional services, hospitals and insurance. The change in that is zero - while in earlier months it was positive.

It might be too too early to expect to see savings in insurance yet. Most people have insurance either from the government (Medicare/Medicaid) or a group plan. Group plans set the rates on a yearly basis, so any savings may not be shown yet. (Not to mention, many provisions improve what you get. For me, my 25 year graduate student daughter will be included. So, if the premiums paid by us and the company my husband works for go up - a fair estimate requires considering the cost for insuring her. For others, there may be the less dramatic difference for no copays on wellness visits for their kids.)

But - that is conjecture. What isn't is that the increase in that sector is Zero - meaning that in some cases it is those with an agenda pushing the line that HCR made things more expensive. (I actually only expected that the rate of increase in the first year would decline, not that it would go down or stay flat.)

[Beetwasher]

32. Can I Buy You Dinner?

You rock.

[karynnj]

44. Thanks for the compliment

You rock as well.

[quiet.american]

4. Excellent. And no doubt the Obama administration pushing back on insurance hikes contributed. nt

[ProSense]

5. Some people have a complete aversion to positive news. n/t

[Warren Stupidity]

6. OK. so the other 5 times this happened were because of ....

I think it is fine that the obscene increases in health care costs have taken a breather, but you cannot claim credit for this unless you a) just like to say stuff you cannot back up, or b) have some actual facts that demonstrate that anything this administration has done is actually a causal factor.

[Kahuna]

8. Really? I think that the first decline in 35 years cannot be arbitrary..

Why all of sudden after 35 years of hikes would the suddenly go down? Give the Dems credit where do. You can't prove that the gas prices are lower because of anything the Dems did, but the fact remains that they didn't start to go down and stabilize until the Dems took control. Know that if the repukes regain control in Nov, they will go back up. They always do.

[Warren Stupidity]

10. 0.1%

The article linked clearly offers a different hypothesis: deflation. You actually do not want the administration to take credit for that, even if you think you do.

Again, other than 'I like to make things up' do you have any evidence for your hypothesis?

[karynnj]

12. All items went up by .3%, so it strains credibility to speak of deflation.

Now, partially closing the donut hole is a far more likely cause.

[Warren Stupidity]

18. take it up with the author of the article

[karynnj]

11. That is pretty easy to do

The component that fell .2% is drugs and devices. Do you remember reading that the drug companies agreed to partially close the donut hole? That is one of things that went into effect immediately. The government also sent checks to people who had earlier in the year incurred charges in this range.

Now, could all those checks and the ongoing partial closing of that loophole have led to a .2% decrease in the total drug and devices category? It seems pretty likely to me. This is a permanent change so it would seem that this decrease is very likely real.

Comment please.

[Warren Stupidity]

20. Please elaborate on your donut hole theory.

The government indeed sent checks to medicare plan D recipients. How exactly did that lower medical costs? It seems instead, if it had any effect on costs, it would be an upward effect due to increased demand from senior citizens who have in the past simply gone without the drugs they need. My guess is this had no measurable effect on prices.

The 'loophole' part of the Healthcare Prevention Industry Reform Act does not take effect until 2011, when people in the donut hole get a 50% discount on name brand drugs from all manufacturers participating in plan D. How is that lowering prices in 2010?

[karynnj]

24. It does lower the costs for those people as it may be subtracted

from what they paid - and Medicare part D is the drug plan. How would you estimate the cost of drugs to these people? My guess is that they sum the price of insurance plus the copays to get an estimate of cost. Therefore this does lower cost.

As to cost increasing because they buy more - the cost would be normalized so the "unit" is the same.

Explain how you have deflation, when the entire CPI is positive, not negative. That is much harder to explain.

[Warren Stupidity]

39. You are just making stuff up.

Please stop. Government payments to plan D recipients are not subtracted from anything related to the calculation of medical costs.

"How would you estimate the cost of drugs to these people?" - by the price received by the seller. You aren't even attempting to make sense. You are grasping at straws to sustain an argument you plucked out of the air.

The author of the article claimed deflation, not me. I have no idea why medical costs went down a massive 0.1% for one month in a row. You are the one asserting that plan D supplemental checks and a donut hole adjustment that doesn't go in effect until 2011 are responsible.

[karynnj]

41. I am not in the habit of "making things up" and I didn't here

So, rather than question an author of a published article, who pulls "deflation" out of the air - when in fact, it is objectively not happening to explain a change you mock as "massive", you reject what could be a plausible explanation - here is a link that explains the components. The link is from the Bureau of Labor Statistics - you know the group that actually computes the index. The group that has a large number of statisticians working hard to create estimators that do their best to reflect the actual costs to households? (It is consistent with what I assumed, which was based on my knowledge of a different component of the CPI which I looked at in more detail when I worked in that industry.)

The CPI is suppose to represent the cost to people and most of the components are estimated by relatively complex formulae. I did not make this up - I spoke of the CPI attempting to get the out of pocket costs which is their goal.

Here is the most relevant paragraph:


"For the medical care categories the CE collects information on household out-of-pocket expenses.These may include data such as healthcare services received, who received it, the amount of payment made, and insurance reimbursements received. Medical care expenditures eligible for the CPI include out-of-pocket expenses paid by the consumer. These include fees (not recouped through health insurance) that consumers paid directly to retail outlets for medical goods and to doctors and other medical providers for medical services, as well as health insurance premiums that consumers paid (including Medicare Part B). To arrive at the consumer out-of-pocket medical expense, the CE nets out direct insurance reimbursements to the consumer from the total amounts paid by the consumer.

http://www.bls.gov/cpi/cpifact4.htm

This would suggest that for the group of Medicare recipients, the CE would net out those $250 checks - because it really did lower the cost for the medications. (The impact would be small affecting a small percent of households.)

Please note that in all my posts - I said this could be an explanation - and from the BLS information, there is reason to say this. It should have been included in the averages because for some it did lower their out of pocket cost - which is what they are trying to estimate.

[Hansel]

15. That's right. It cannot be argued in either direction because it hasn't been implemented.

My guess, though, is that insurance companies know that if they don't find a way to get their costs under control and start offering a more reasonably priced product that they will not make it on the exchange in 2014, which would give their competitors a huge advantages for getting new clients. All insurance companies are to be limited in their percentage of profits from premiums so they are going to have to figure this out.

What I think a big impact is on the price might be is the increased use of generic drugs over brand name drugs. Some insurance companies have outsourced their prescription medications to third parties who can buy drugs on a larger scale and push for the used of generic drugs. This has got to significantly be decreasing the cost to insurance companies for prescription medication. When HCR goes into effect, they are only going to be able to reap a certain percentage of those savings thus decreasing premiums for customers.

[quiet.american]

21. If Aetna and Anthem had instituted their planned massive rate hikes --

-- would the costs of medical care most likely have gone up, or gone down? It's not rocket science.

[Warren Stupidity]

23. How does a rate hike cancellation decrease prices?

Please explain.

[karynnj]

25. Here - the impact is that had it happened the CPI element that included insurance would have risen

It might have risen enough that it would have made the combined health index positive.

But, given that you credit that an increase that was to occur, didn't - doesn't that deserve some credit for Obama?

[Warren Stupidity]

40. "would have risen" - ok fine. Now where did the DECREASE come from?

[quiet.american]

28. Coupled with new protections like free preventive care and elimination of certain co-pays --

-- it's not a far leap to take.

(You can Google "Affordable Care Act, Immediate Benefits; Benefits for Seniors" for the details of how much it has already reduced costs- no need to post it here as facts are generally ignored in favor of angry or "disappointed" fact-free rants.)

[Beetwasher]

31. Also, Don't Discount The Impact Of Fed Oversight: They Are BEHAVING Themselves

Because NOW they know the feds are looking over their shoulder and have the power to fuck them up if they get out of line.

[Kahuna]

7. But..but but... The professional left don't seem to agree!

:evilgrin:

[Vinca]

13. Maybe it's because people can't afford luxury items like medical care anymore

so they are forced to lower their prices to stay in business.

[cornermouse]

14. Brought to you be the same people who claim that unemployment

did NOT increase in spite of the breath taking number of people who lost their jobs last month so of course we must believe them on this as well. :eyes:

[ProSense]

16. Well, at least it didn't

climb to 13 perecent as some people predicted. It went as high as 10.2 percent, and now stands at 9.5 percent.

[cornermouse]

17. The figures they're posting is a lie.

All you have to do is check with your neighbors or drive dwon the street and look at all the "for rent" signs in what used to be active malls and "for sale" signs in front of homes to know the unemployment figures are inaccurate.

Its one of the things that has disappointed me most about the current democratic party leaders after 25 years of voting for democrats.

[ProSense]

19. It's a

conspiracy. Only the negative numbers are real.

[babylonsister]

27. Yes! The Dept. of Labor is lying!! Oy.

Just to piss you off, I'm sure.

PS Prove it.

[Beetwasher]

30. Well Then! Cornermouse Says It's A Lie!!! Everyone Believe Cornermouse's Anonymous Internet Anecdote

Because we all know how reputable anonymous internet anecdotes are!

[karynnj]

42. Your neighborhood is not a random sample of the country

Unemployment is not evenly spread. It is higher everywhere than it was 2 years ago, but the rate is not the same in poor neighborhoods and wealthy ones. What if I posted that I drove to Short Hills, NJ (a very wealthy town) and went door to door asking where people worked and found few unemployed (before someone called the police - ending my statistics gathering)? You would point out that Short Hills does not reflect the country as a whole - and you would be right.

Now, on the other end of the economic spectrum, last December, I did visit a community on the South side of Chicago, where one of my kids works in a volunteer organizations. I was stunned at the number of "for sale" signs and the number of boarded up buildings.

There are various measures of unemployment - many are higher than the 9.5%. All of the metrics are important for different purposes and they do mean something if they are consistently estimated - so you can look at the trends. (It is weird to see Republicans use the higher estimates, which include people who have given up looking - which in other times only the left have referenced.)

As to the disappointment with Democratic leaders, that is obviously your privilege. I would though suggest that you look at how narrow the passage was on the stimulus package, the budget, and more recent unemployment extensions and job bills. The fact that they NARROWLY won after they were trimmed back to get the last needed votes, suggest that the people - Obama, Reid and liberal and progressive Democrats have gotten as much as they could pass. I won't argue that it was enough - it clearly wasn't - and all the Democrats I admired wanted more.

You have never liked Obama - having fallen for all the lies of John Edwards, who DID NOT work for legislation to help the poor when he was a Senator (nor helping unions, something that Biden did a great job at one of the debates). The fact is that Obama has gotten a HUGE amount of legislation passed. I suspect that the unhappiness is a function of the fact that the possibilities seemed limitless in 2008 - and every candidate spoke in idealistic terms on what their vision was. But, with victory, their is a cold awakening to the limits that prevent a President from getting everything he wants.

[karynnj]

26. Can you read the CPI table?

You do realize that the unemployment rate and the jobs number are not from the same data source. You do realize that their is a range of numbers that round to 9.5% unemployment. (Not to mention there are different data sources for each of those numbers leading to such results.)

The CPI is a very respected index. The only complaints have been in terms of what components are included and how they are defined.

[SunsetDreams]

22. K&R

[Beetwasher]

29. K&R For The Long Arm Of The Feds NOW Able To Get A Hand On Health Ins. Co's

n/t

[depakid]

33. And yet- behold

Double digit premium increases cross and more onerous coinsurance across the board from private insurers!

I'm sure people facing those are going to LOVE these graphs.

[karynnj]

43. Those existed before the legislation and if anything the legislation

has shifted the curve downward from where it was going before the legislation.

[smalll]

34. Because the economy sucks?

:shrug: Just a wild guess. :shrug:

[frazzled]

35. Or maybe it's because they're really cutting costs (personal story)

Almost two months ago I received a call from the police in a town north of the city I live in. They told me they'd taken my husband to a hospital about twenty miles away and that I should come there. (He'd been out on a 60-mile bicycle ride and, riding alone near the end, sustained an accident.)

So after a while, the emergency room doctor comes to tell me my husband has fractured his shoulder in three places and might require surgery, broken several ribs, and punctured a lung. And he's signing the release papers and I can take him home now. I was a bit stunned, to say the least, especially when he advised me to check his breathing carefully during the night, and take him in if he should have difficulty breathing (although he didn't THINK I had to worry about it too much). And, oh yeah, get him to an orthopedic surgeon and a thoracic surgeon within two days.

The only thing I could think of was, geez, they really are serious about cutting costs. I had to drive him home in a hospital gown because they said he couldn't even be dressed! In the end, I was glad they sent him home: he did not stop breathing and didn't need surgery in the end. And the cost of seeing two doctors was probably less than several days in full hospital care. And, oh yeah, they sent me home with films of the X-rays and CDs of the CT scans they'd taken, so these tests wouldn't have to be repeated when we got home to our local doctors.

The bills were pretty extensive (insurance seems to be paying them all), but not nearly as expensive as they would have been with a hospital stay for the same procedures. Maybe this is the new way.

[eridani]

36. Not too helpful when the insurance motherfuckers continue ti increase premium costs n/t

[karynnj]

46. might be nice if you even read the article

The component that includes health insurance was flat last month. This is something that needs to be watched over time, but it is not the bad news that you cynically expect.

There is an article today on more states getting money to increase the resources they have to regulate price increases. http://www.usatoday.com/money/industries/insurance/2010-08-16-1Ainsurancerates16_ST_N.htm That regulation may lead to other states having the success that California did in finding errors that would have led to huge increases.

States plan to use $46 million in grants under the nation's new health law to help curb health insurance rate increases for consumers by seeking new regulatory powers, hiring rate experts and posting insurance company financial documents on the Web, according to grant application details.

Consumer outrage over double-digit rate hikes helped spur the new federal health law, yet states remain responsible for regulating insurance rates under varying state laws. The grants, which the U.S. Department of Health and Human Services (HHS) is set to announce today, are the first in a five-year program to bolster state regulation.

States "that have no authority to disapprove or even review rates are now seeking authority to do both, and states that have traditionally kept data on rates non-public are making that information public," HHS Secretary Kathleen Sebelius said in a statement to USA TODAY.
<snip>

Only after California regulators hired outside experts to scrutinize a controversial 39% rate increase sought by Anthem Blue Cross were the company's mathematical errors revealed, she notes.

[eridani]

52. Wow. Making data on how insurance companies screw us available--

--will be soooo useful. Not. How about the power to goddam fucking ORDER them to set affordable rates? Point out where it says this.

[Bryn]

37. Of course! There are lots of people suffering

and dying out there because they cannot afford healthcare today. So Medical Care prices have fallen due to lack of patients! They cannot go to doctors/hospitals anymore.

[girl gone mad]

38. Deflation at work.

I expect the bubbles in health care and education will both lose air as our economy slides.

[karynnj]

48. When the overall CPI goes up ,3% - we are not experiencing deflation nt

The fact is there were major changes that are beginning to take affect because of the landmark legislation. It would seem fair to at least consider that they were due to that.

[girl gone mad]

51. This is definitely an indication of deflation.

Deflation is here and now, all around us.

The CPI misses deflation for the same reasons it never reflected the high levels of inflation during the bubble decades.

Inflation is a net expansion of money supply and credit. Deflation is a net contraction of money supply and credit.

Given that consumer credit is plunging at unprecedented rates, and credit dwarfs money supply creation, and given that credit valuations on the balance sheets of banks are falling and the money multiplier effect has predictably failed, we are in a period of deflation.

[zipplewrath]

45. "With the margin of error"

"The decline in the medical care index was after all only 0.1 percent from June to July, a slight drop that still puts the possibility of growth within the margin of error."

You folks need to read what "within the margin of error" means. There is literally nothing here, good or bad. Inflation is excrutiatingly low right now, and we are in danger of deflation. The medical category is as affected by this as are other categories. Come back in a year and we can see if anything has really changed.

[karynnj]

47. Not totally true - while you can't say definitatively that it decreased

from this it is more likely that it decreased than that it stayed the same or increased. (It will be lower than 95% - which the MOE likely is set at - but it will be greater than 50% because the area under the curve in symmetrical about this decrease - so more than half the area under the curve represents a decrease.)

What is true is that it is very small and could be a blip - like the other 5 times in 47 years were. There are reasons to hope otherwise - including the fact that there was money to help states monitor the insurance companies - and that can result in rates being lower than they otherwise would be.

[zipplewrath]

49. I don't think insurance is in that category

Insurance company rates weren't in that category, if I understood correctly. The measurement was in medical CARE (drugs, devices, services, etc.) The states didn't get any money to monitor that. Truth is HCR didn't address the cost of care much at all.

[karynnj]

50. It was and wasn't -

Insurance is with services and hospital and that category was 0%. Medical commodities was drugs and devices and that was down 2% - leading to the composite (which I was speaking of because that was what the previous poster referred to was down 1%.

The states via the exchanges will be able to both monitor and approve which plans are allowed in. In MA, a similar provision led to a decrease of 6% in costs. It will depend on how aggressive the states are and whether they can generate competition between the companies. One advantage is that there is a requirement that information on plans be written so they can be compared. This alone would help - as I know having compared my husband's and my corporate plans to find which was better to select and pay for for our family. (We both have graduate degrees in math and he has an MBA - and it was tough figuring it out - it shouldn't be.)