The nation’s health care piggy bank is looking a little better. Health care spending growth slowed in the U.S. by more than $500 billion between 2003 and 2012. If trends continue for the next decade, current projections of spending may be too high by $770 billion.
That’s according to two recent studies published in Health Affairs (Health Affairs May 2013 vol. 32 no. 5.)
Spending Growth Slowdown
The first study led by Harvard Professor Michael Chernew, says that “current trends support cautious optimism that the spending slowdown may persist—a change that, if borne out, could have a major impact on U.S. health spendingprojections and fiscal challenges facing the country, among other factors.”
According to the article abstract, during and immediately after the recent recession, national health expenditures grew exceptionally slowly. During 2009–2011 per capita national health spending grew about 3% annually, compared to an average of 5.9% annually during the previous ten years. Chernew says policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift.
The study examined two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people. Based on an examination of data covering more than ten million enrollees with health care coverage from large firms in 2007–2011, the authors found that “these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work.
“Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist—a change that, if borne out, could have a major impact on U.S. health spending projections and fiscal challenges facing the country.”
Future Savings
The second study led by Harvard Professor David Cutler found that despite earlier forecasts to the contrary, U.S. health care spending growth has slowed in the past four years, continuing a trend that began in the early 2000s.
The study attempted to identify why U.S. health care spending growth has slowed, and explored the spending implications if the trend continues for the next decade.
The researchers found that the 2007–2009 recession, a one-time event, accounted for 37% of the slowdown between 2003 and 2012. A decline in private insurance coverage and cuts to some Medicare payment rates accounted for another 8% of the slowdown, leaving 55% of the spending slowdown unexplained.
They concluded that a host of fundamental changes—including less rapid development of imaging technology and new pharmaceuticals, increased patient cost sharing, and greater provider efficiency—were responsible for the majority of the slowdown in spending growth. “If these trends continue during 2013–22, public-sector health care spending will be as much as $770 billion less than predicted. Such lower levels of spending would have an enormous impact on the U.S. economy and on government and household finances.”
This looks like good news for payers and device makers who have stabilized their business models. The impact on patients and providers is yet to be determined.
