There Seems To Be Lasting Improvement to U.S. Healthcare Spending

Currently, healthcare inflation is at a historically low rate. According to Jason Furman, the chairman of President Obama’s Council of Economic Advisors, healthcare prices have grown at an annual rate of 1.6% since the Affordable Care Act was enacted in March 2010, the slowest rate in the past 50 years. Consequently, the Congressional Budget Office continues to reduce its cost projections for federal healthcare programs. Projections from October for the year 2020 were $175 billion lower than the projections made in August 2010 for the year 2020.
 
Nevertheless, people are skeptical about the reason for the reduction in healthcare inflation. Some people emphasize that the economy experienced a recession, which resulted in patients seeing the doctor less often, and it can take up to 6 years for the healthcare costs to rapidly increase again. Another group believes that healthcare inflation is lower because general inflation is down, and once general inflation returns to normal healthcare prices will increase.  Finally, other people argue that there has been a decline in technological innovation, so no new drugs or machines have been introduced to the market.
 
The reduction in healthcare costs seems to be a global trend, as cost growth has slowed in every high-income country since 2000. This may be a result of efficiencies being transferred between countries. However, the Obama administration argues that Obamacare is responsible for the reduction in costs. The Affordable Care Act incentivizes providers to keep people healthy and reduce the amount of testing and procedures. In addition, the law also encourages bundling, which means there is a single payment for all the services associated with an episode of care. The law also penalizes hospitals for patients that have to be readmitted, so there has been a significant drop in readmissions. Despite the reduction in costs, it is still just as important to consider the surge in prices for healthcare. Some firms are projecting 6.5% price inflation for 2016. 

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