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Will Burwell Corral Health-Care Costs?

Author: Peter R. Orszag, Adjunct Senior Fellow
April 14, 2014
Bloomberg.com

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In the past several months, health-care costs outside Medicare may have accelerated, even as Medicare spending growth remains remarkably low. This is why Sylvia Mathews Burwell (who is a friend of mine) has the opportunity to be a transformational secretary of Health and Human Services. If over the next three years she can take the bold steps needed to reinforce better value in health care, she will drastically alter prospects for everything from the federal budget to state and local priorities (including education) and the take-home pay of America's workers.

After several years of very slow growth, total health-care spending picked up in the fourth quarter of 2013, data from the Bureau of Economic Analysis show. This has led some commentators to declare an end to the era of slower health-cost increases, which has lasted for the past several years. Yet Medicare spending growth is still low, even through last month. Indeed, in the first half of this fiscal year, nominal Medicare spending was only 0.6 percent higher than in the corresponding period a year earlier.

The combined acceleration in total health-care spending (which should be expected to pick up as the economy continues to recover) and continued low growth in Medicare highlights why leadership is needed from Health and Human Services. If the secretary provides a clear glide path for shifting away from fee-for-service payments, then low health-cost increases will be much more likely.

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