Slowdown in rise of health care costs may persist
WASHINGTON — One of the economic mysteries of the last few years has been the bigger-than-expected slowdown in health spending, a trend that promises to bolster wages and help close the wide federal deficit over the long term — but only if it persists.
Major new studies from researchers at Harvard University, the Henry J. Kaiser Family Foundation, and elsewhere have concurred that at least some of the slowdown is unrelated to the recession, and might persist as the economy recovers. David M. Cutler, the Harvard health economist and former Obama adviser, estimates that, given the dynamics of the slowdown, economists might be overestimating public health spending over the next decade by as much as $770 billion.
Between 2009 and 2011, total health spending grew at the lowest annual pace in the last five decades, at just 3.9 percent a year, although rising out-of-pocket costs have hit millions of families. In contrast, between 2000 and 2007, those annual growth figures ranged between 6.2 and 9.7 percent, according to government figures. Data from the Altarum Institute, a nonprofit research organization in Ann Arbor, Mich., suggests that the low pace of growth has continued through 2012 and early 2013.
The studies — including some released Monday in the journal Health Affairs — shed new light on the precise mix of factors that have led to the flattening-out.
Economists concur that the deep recession and sluggish recovery are the main reasons for slowing growth in spending. During the recession, millions of Americans lost their jobs, and thus their insurance coverage; millions more struggling families were reluctant to see a physician or undergo a procedure. But the slowdown in health costs proved steeper than forecast. It also occurred in populations whose health spending was mostly sheltered from the economic gyrations, like Medicare patients.
That led economists to surmise that other factors were at play. In new research, the Kaiser Family Foundation estimated that the recession accounted for about three-quarters of the lower spending trajectory, with the rest attributed to other factors not directly related to the economy. Cutler of Harvard calculates that the recession accounted for about 37 percent.
Among other factors, the studies found that rising out-of-pocket payments had played a major role in the decline. The proportion of workers with employer-sponsored health insurance enrolled in a plan that required a deductible climbed to about three-quarters in 2012 from about half in 2006, the Kaiser Family Foundation has found. Moreover, those deductibles — the amount a person needs to pay before insurance steps in to cover claims — have risen sharply. That exposes workers to a larger share of their own health costs, and generally forces them to spend less.
Thus, while economists have cheered the flattening in health spending, families have assumed more and more of the health care burden.