Lower Health Spending Growth Is Due To Structural Health Changes

The slowdown in U.S. health spending growth rates may be due to structural changes in the health care system and not due to the economy, according to two new studies published recently in Health Affairs. Thus, the studies assert that the slowdown could continue even after the economy picks up.

From 2009 to 2011, per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the past ten years. Policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift. However, the two studies published in Health Affairs agree that change is permanent, but neither can pinpoint exactly what factors are responsible for the slowdown.

The first study examined to what degree job loss and insurance benefits were responsible for restraining health care spending. In examining claims of 10 million employees at 150 large companies between 2007 and 2011, the researchers determined that spending rates on medical services by the employed, which had been accelerating at 5 percent before the recession, decreased in 2010 to less than 2 percent. The spending by employees of the big companies accelerated in 2011 to slightly more than 2 percent, but it has not rebounded to the level it was before the recession.

The second study found that national health spending between 2003 and 2012 ended up being $514 billion, or 16 percent, below the level predicted by government actuaries at the Centers for Medicare and Medicaid Services. The study concluded that only 45 percent of the slowdown could be attributed to three factors: the recession during 2007 through 2009, a drop in coverage from private insurance, and the government’s Medicare payment cuts. “The slowdown pre- and postdates the recession and shows up in populations whose medical care use is normally unaffected by economic cycles, such as the elderly,” according to the study.

The researchers believe that the remaining 55 percent of the spending slowdown was due to “a host of structural changes—including less rapid development of imaging technology and new pharmaceuticals, increased patient cost sharing, and greater provider efficiency.” If the trends continue over the next decade, they said public-sector health care spending could be as much as $770 billion less than predicted.

KFF findings. The Kaiser Family Foundation (KFF) recently released study findings on the same issue and found that the economy is a major factor in the recent health care cost growth slowdown. The KFF study looked at national health spending between 1965 and 2011, and determined that inflation and growth in the economy explained 85 percent of the variation in health spending during those decades.

KFF estimated that economic factors were responsible for 77 percent of the recent decline in health spending, and therefore likely to be temporary. “Increases in health expenditures are likely to trend upwards over the coming decade as the economy returns to a more normal rate of growth,” according to KFF. “Sustaining low growth rates in health spending will require continued pressure for containing costs throughout the system.”

For more information, visit http://content.healthaffairs.org/content/32/5/835.abstract, http://content.healthaffairs.org/content/32/5/841.abstract, and http://www.kff.org/insurance/snapshot/chcm042213oth.cfm.

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