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Health care costs increased just 2 percent last year, the slowest rate of growth in 65 years, in large part because of the cost controls created with the Affordable Care Act. That means inflation is curbed, and it also means that U.S. treasury bonds are a good bet for investors.
Less inflation, which boosts the purchasing power of fixed-rate payments, may help attract buyers to Treasuries as the economy strengthens and the Federal Reserve pares its own bond buying. While yields have fallen this year, the compensation 10-year notes provide after inflation is close to the highest in five years. Excluding food and energy, health care accounted for about a third of the slowdown in consumer prices, which rose 1.1 percent in the past year from 2 percent in the prior 12 months.

“This is good news” for bonds, Kathy Jones, a New York-based fixed-income strategist at Charles Schwab & Co., which has $2.25 trillion in client assets, said in a telephone interview on April 4. By holding costs down, “it may be a benefit to inflation, longer-term.”

Jones, who has been advising clients on the bond-market implications of the health-care law, is recommending that investors buy 10-year Treasuries because low inflation will keep the Fed from lifting interest rates. […]

Inflation has remained below the Fed’s 2 percent target for 22 straight months and “a couple” of policy makers said at its March meeting that “unusually slow growth” in health-care prices has played a “notable role” in holding back prices, minutes of the gathering released on April 9 show.

These cost controls in the law are largely through cuts in Medicare payouts to poor-performing hospitals and through the incentives it created to curb readmission rates, as well as and changed payment programs to reduce unnecessarily expensive procedures. Just think what savings could be achieved if Medicare could negotiate prescription drug prices. Or how much could be saved in a public option where the government was setting reimbursement rates for all care.

The Republican mantra that the law is a total disaster that will doom the nation is sounding more and more ridiculous. This news, combined with the latest projections from the Congressional Budget Office on the cost savings ($104 billion over previous projections in the next decade), is going to make a hard sell for Republicans with their traditional allies in the financial sector, not to mention the millions of people who would lose access to health care.

Originally posted to Joan McCarter on Tue Apr 15, 2014 at 08:07 AM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  Tip Jar (32+ / 0-)

    "The NSA’s capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything. [...] There would be no place to hide."--Frank Church

    by Joan McCarter on Tue Apr 15, 2014 at 08:07:18 AM PDT

  •  Hey Boehner......Don't you look stoopid. (4+ / 0-)
    Recommended by:
    elwior, hbk, VPofKarma, whl
  •  Which is good for Social Security, as most of (4+ / 0-)
    Recommended by:
    elwior, hbk, virginislandsguy, JanL

    the trust fund is now in T-bills since Congress took that money to balance the budget.

    "Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity." --M. L. King "You can't fix stupid" --Ron White -6.00, -5.18

    by zenbassoon on Tue Apr 15, 2014 at 08:19:28 AM PDT

    •  Someone didn't read their article. Go figure. (3+ / 0-)
      Recommended by:
      edwardssl, NedSparks, Jeff Simpson

      ODS results in Obama's amazing ability to humiliate his biggest critics, on the right and the left.

      by NoFortunateSon on Tue Apr 15, 2014 at 08:55:15 AM PDT

      [ Parent ]

    •  Usually, go with the money. (5+ / 0-)

      So if the investors are flocking to US Treasuries because of low inflation in one of the major inflation component, healthcare, then I know ACA is working.

      PPACA has many, many cost control measures. As time goes on, you will read more and more anecdotes like the one below.

      With new health law, insurers target diabetics

      Read more here:

      As hundreds of thousands of diabetics get health coverage under the federal law, insurance companies are aggressively targeting this glut of new patients, who are expensive to treat and often lax in taking medications and following their diet.

      Insurers are calling diabetics when they don't pick up prescriptions or miss appointments. They are arranging transportation to get them to the doctor's office and some are even sending nurses on house calls in an effort to avoid costly complications that will have big impact on their bottom lines.
      •  Maybe (1+ / 0-)
        Recommended by:

        or maybe not, considering recent reports like:

        Health care spending rose at the fastest pace in 10 years last quarter, a development that could foreshadow higher costs for consumers this year.

        Expenses for health care rose at a 5.6% annual rate in the fourth quarter, the Bureau of Economic Analysis said last week. The jump triggered a sharp upward revision in the government's estimate of consumer spending overall and accounted for nearly a quarter of the economy's 2.6% annualized growth in the last three months of 2013.

        from Health care spending growth hits 10-year high

        Or this:

        The figure also shows CMS projections to 2021, the furthest year for which the Office of the Actuary has generated estimates. From 2013 to 2021, health expenditures are expected to grow 64%. Only a small proportion of this increase will be due to population growth as per capita expenditures are expected to grow 53% over the same time period. The sustained increases are fueled by several factors, including the new infusion of funds from the ACA, the continued improvement in the overall economy (see our related blog), technological advances (including drugs, devices, & surgical processes), and the aging population.

        not saying that's a bad thing, just that we shouldn't be denying what's happening.

        •  Are you saying that we would have been better (3+ / 0-)

          off without PPACA?

          Are you saying that PPACA does absolutely nothing to bring down healthcare costs?

          The law is just starting to take effect. So the verdict is not clear yet no cost control. But it will be in the next 3-4 years.

          •  Well, this much we agree upon . ... (0+ / 0-)
            The law is just starting to take effect. So the verdict is not clear yet no cost control.
            IOW, the claims in the diary the ACA is already dampening costs is off-base both from the POV that that's not actually happening (i.e., cost increases are NOT the lowest for a long time) and second, even if they were, they could not yet be attributed to the ACA.

            But the ACA does nothing important to fundamentally  control costs - which are a three headed monster consisting of really high physician salaries, few if any restraints on Big Pharma and the medical device industry, and most importantly the retention of the highly-flawed fee-for-service mode of reimbursement.

            •  You overlook the most important thing PPACA (0+ / 0-)

              will do to bend the cost curve: Preventive Care

              The emphasis on free preventative care on ACA compliant plans will have a huge effect.  I think you are underestimating this.

              Prevention is always better and much cheaper than cure.

              •  Preventive care is great for the people who (0+ / 0-)

                now have access to it through ACA on a personal level.

                But overall it will have little effect on the larger trends considering that ACA enrollees will account for about 10% of the population - therefore even if their healthcare costs are only half of what they otherwise would have been the overall impact on the system would be a 5% in reduction in costs.

                Which pales beside the project 50 to 60% overall increase projected over the next few years.  IOW, in a best case scenario those numbers would be knocked down to 45 to 55%

              •  Preventative care is great if people use it. Our (1+ / 0-)
                Recommended by:

                insurance has always included a free physical each year and even free blood work to boot with that physical.  My husband has used this benefit zero times in 14 years.  He won't go to a doctor unless something is falling off.  No amount of begging on my part helps in this regard.  He'll be 45 this year and still won't go.  

                Anyway, just my thoughts on the whole preventative care thing.  I am certain he is not the only one.

        •  Some health care costs are trending lower (3+ / 0-)

          Why is a matter of vigorous debate:

          From your link:

          In 2013, health spending is expected to grow 3.8% according to the Centers for Medicare & Medicaid Services (“CMS”) Office of the Actuary. In the decade from 2000-2010, the average annual growth rate in health expenditures was 6.6%. The 2013 growth rate is lower for a number of reasons, including the lingering effect of the 2008 economic recession and government payment reductions associated with the Sustainable Growth Rate (“SGR”) formula and the Budget Control Act of 2011. Annual growth rates in expenditures have been relatively low since 2009, ranging between 3.8% and 4.2%.

          Supporters of the law say it is due to the cost controls incorporated in the ACA. Others say the lower costs are due to a still sluggish economy.

          The White House and political supporters of the Affordable Care Act argue that the law has played a significant role in bending the cost curve in healthcare (one of the primary objectives of the Affordable Care Act), others believe that the ACA has played little—if any—part in slowing the growth of health related expenditures.

          The points in favor of crediting Obamacare as a significant factor in the improved spending picture are ably put forward by Harvard economics professor and one time senior healthcare advisor to the 2008 Obama campaign, David Cutler, in his op-ed piece for the Washington Post.

          Professor Cutler lists the following elements of the law as playing a major role in bringing spending increases down:

          The ACA provisions that base payments on the value of medical care rather than the volume of care. More providers are now paid flat fees for an incoming patient rather than their being paid for the number of services and tests provided to that patient. This causes providers to be efficient in their care and avoid unnecessary tests and procedures.

          The increased number of Accountable Care Organizations which are designed to make providers more accountable for the cost and quality of the care provided.

          Cutler points out that there are now some 500 ACO organizations throughout the nation, half of which are designed for Medicare patients. Writes Cutler, “Ten percent of Medicare beneficiaries are in ACOs, and many others are in payment systems that put together all reimbursements for a procedure, such as a hip replacement or cardiac stent insertion. Leaders of medical systems routinely report that they expect, and are preparing for, a move to value-based payments.”

          A decline in hospital re-admissions as a result of a provision in the ACA that does not permit a hospital to bill Medicare when a patient returns within 30 days of discharge. While these readmissions used to bring in substantial money to hospitals, and cost Medicare accordingly, Cutler reports that readmissions are down 10 percent since 2011.

          Those less prepared to credit Obamacare with the positive data are more likely to point to the fact that the sluggish economy and high unemployment are primarily responsible for putting a dent in the cost curve. Simply put, when people don’t have money to spend on healthcare, the total amount spent throughout the nation will decrease.

          Since this is a diary about markets, it is widely understood that on Wall Street that reality is what investors perceive and they appear to perceive that costs are going down, even though it will be some time to decisively conclude what exactly precise factors are driving that trend and how long term that trend will last.

          "I am not interested in picking up crumbs of compassion thrown from the table of someone who considers himself my master. I want the full menu of rights." (From "You Said a Mouthful" by Bishop Desmond Tutu - South African bishop & activist, b.1931)

          by FiredUpInCA on Tue Apr 15, 2014 at 10:12:11 AM PDT

          [ Parent ]

          •  The information presented (0+ / 0-)

            at this link seems to quite compelling link health care expenditures in the 2009-2011 time frame with the economic plight of the country involved  - e.g., there was an extreme effect in places like Greece and Ireland and little impact in places like China and Korea.

            Of course, ObamaCare could have magically reduced costs in southern Europe as well, who knows.  But an "Occam's Razor" type of analysis would pin reduced health care costs in the 2009-2012 era on the Great Recession"

    •  I don't understand why you think (4+ / 0-)

      the article you linked to makes your case that the ACA is bad.

      U.S. healthcare usage is up because people are making more visits.  Makes sense since more people were covered under ACA, even in 2013 and could now see a doctor.

      From your link

      Healthcare utilization was up across the board, with rises in doctor office visits, hospitalizations and volume of prescriptions filled, IMS said.
      More coverage, more people are able to see the doctor.  Isn't that what we were fighting for?  So that sick or concerned people could go get a medical checkup?

      More people seeing the doctor is supposed to be a good thing.


    •  And then what's going to happen in 2014 when (2+ / 0-)
      Recommended by:
      NedSparks, Zwenkau

      even more millions are covered, many who haven't seen a doctor in decades.  

      They're going to see a doctor.  Which is good.  That's why we wanted people to be covered - so that they could see a doctor.  That's why annual checkups are covered, to catch treatable illnesses before they become serious.

      Are you suggesting that they shouldn't visit doctors because healthcare usage statistics are going to shoot up dramatically in 2014 if they do?

      And that's bad?


  •  Back in January (4+ / 0-)

    when all the pundits were predicting a slaughter in the midterm election for Democrats, I remember thinking "maybe that's a little premature, what if it works"? Well, I'm not holding my breath, but it would be nice for once, to hear someone like David Brooks admit he was wrong.

    •  You'll hear David Brooks admit his (3+ / 0-)
      Recommended by:
      Gooserock, Delevie, llywrch

      error, when you see him at an Applebee's salad bar.

      I’ve said before, I will always work with anyone who is willing to make this law work even better. But the debate over repealing this law is over. The Affordable Care Act is here to stay. -- President Barack Obama

      by Its the Supreme Court Stupid on Tue Apr 15, 2014 at 08:50:55 AM PDT

      [ Parent ]

    •  Predictions of midterm slaughter are premature. (5+ / 0-)

      Mark Pryor is surprisingly doing well against that Teabagger fool Tom Cotton. I thought Pryor had no chance. But he is slightly ahead currently and there is a good chance he can eek out a win with the help of the Big Dog.

      Democrats don't need to lose their wits. They can surprise rethugs in the midterms. Let the rethugs be cocky and think they have this in the bag due to Obamacare.

      Donate, volunteer..Let's not forget 2010. Let's fight to Keep the Senate.

      4 New Polls Show Incumbent Dem Senator Leading GOPer In Arkansas

      Four straight polls of the Arkansas Senate race have found Sen. Mark Pryor (D-AR) leading challenger Rep. Tom Cotton (R-AR).

      Although some of the polls are from Democratic-leaning groups and each of the polls find him with a razor-thin lead, the fact that a rough handful of surveys found Pryor in the lead is notable given that Pryor is considered one of the most endangered Democrats in the 2014 election cycle.

      A pro-minimum wage hike organization released a new poll conducted by Opinion Research Associates showing Pryor with 48 percent support to Cotton with 38 percent of the vote. The pollster surveyed 400 likely voters and had a margin of error of plus or minus 5 percentage points. It was conducted from April 1 to April 8.

      A Hickman Analytics poll on behalf of the Consumer Energy Alliance found Pryor leading Cotton 40 percent to 37 percent among 400 likely voters. That poll was conducted February 17 to February 20. It had a margin of error of plus or minus 4.9 percentage points.

      A Talk Business-Hendrix College poll found Pryor leading Cotton 45.5 percent to Cotton with 42.5 percent with 8 percent undecided. In October the poll found Pryor with a one point lead, 42 percent to 41 percent with 17 percent undecided. The most recent Hendrix poll was conducted among 1,068 likely Arkansas voters between April 3 and April 4. It had a margin of error of plus or minus 3 percentage points.

      Another poll by the Anzalone Liszt Grove pollster on behalf of the Democratic Senatorial Campaign Committee found a tight race with Pryor leading (albeit within the margin of error). That poll found Pryor leading Cotton 48 percent to 45 percent with 7 percent undecided. The Grove poll surveyed 600 voters and had a margin of error of plus or minus 4 percentage points. The poll was conducted from March 27 to April 2.
  •  Circle the wagons! n/t (3+ / 0-)
    Recommended by:
    virginislandsguy, edwardssl, JML9999

    ODS results in Obama's amazing ability to humiliate his biggest critics, on the right and the left.

    by NoFortunateSon on Tue Apr 15, 2014 at 08:55:50 AM PDT

  •  What are the chances (4+ / 0-)

    that this will be reported on any of the major networks' nightly news?

  •  Daily Kos has been saying this for years. (5+ / 0-)

    Long-term deficit projections are driven by expectations of big increases in medical costs. If the Affordable Care Act avoids those increases, Medicare funding becomes much less of a problem.

    Art is the handmaid of human good.

    by joe from Lowell on Tue Apr 15, 2014 at 06:05:40 PM PDT

  •  Any word from CNBC's Amazing Santelli (2+ / 0-)
    Recommended by:
    Zwenkau, FiredUpInCA

    on this good news. I just skimmed the videos

    I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

    by JML9999 on Tue Apr 15, 2014 at 06:05:51 PM PDT

  •  It bogges the mind (0+ / 0-)

    Just think what savings could be achieved if Medicare could negotiate prescription drug prices. Or how much could be saved in a public option where the government was setting reimbursement rates for all care.

  •  Actually it means that the Fed needs to (0+ / 0-)

    be more explicit in trying to get inflation up a bit. We need about 3% inflation just to make sure that we stay out of a deflation trip a la Europe (I'm looking at you, Germany). With the ACA in effect, we need a more expansionary monetary and fiscal policy.

    Voting is the means by which the public is distracted from the realities of power and its exercise.

    by Anne Elk on Tue Apr 15, 2014 at 06:55:07 PM PDT

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