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California Healthline Daily Edition

Summaries of health policy coverage from major news organizations

Experts Link Recession, Changing Views to Drop in Health Care Spending

Policy experts, hospital administrators and academics acknowledge that the weak economy has played a key role in the recent decline in health care spending, but many of them also suggest that the decline could be a result of changing views among health care providers and patients about health care spending, a trend that could continue as the economy recovers, the New York Times reports.

The latest CMS data show that total health care spending nationwide in 2009 and 2010 grew at less than 4% annually, the slowest annual growth rate in more than 50 years. Meanwhile, after years of accounting for a growing share of the country's economy, U.S. health care spending in 2010 hovered at 17.9% of the gross domestic product, the Times reports.

According to the Times, health economists did not expect such a sharp deceleration in health care spending, and some experts note that there still is insufficient data to determine whether the downward trend will continue or if it should be considered as "merely a blip" caused by the economy's weakness.

David Cutler, a Harvard University health economist and former adviser to President Obama, said, "The recession just doesn't account for the numbers we're seeing," adding, "I think there's much more going on."

Some experts also point to the decline in spending on some hospitalized Medicare beneficiaries, whose coverage should not be affected by the recession, the Times reports. Experts also suggest that other unknown factors might have played a role in states where the recession had little effect.

Meanwhile, some experts and officials at CMS say the downward trend in health care spending can be attributed to the recent growth in high-deductible health insurance plans. According to Mercer Consulting, the rate of employees enrolled in high-deductible plans jumped from 3% in 2006 to 13% in 2011.

Other observers believe the shift toward accountable care, which places a premium on quality instead of quantity of care, also has reduced costs. There are about 164 accountable care organizations in operation, and hundreds of other insurers and health systems have taken steps to implement features of accountable care, the Times reports (Lowrey, New York Times, 4/28).

Costs Rise as Obesity Rates Increases

In related news, medical costs related to obesity have exceeded previous estimates by 200% and are higher than the costs related to smoking, according to new research by the Campaign to End Obesity, Reuters reports.

Meanwhile, a study published in January in the Journal of Health Economics found that obesity-related costs have added a total of $190 billion to total U.S. expenditures and accounts for 20.6% of medical spending annually.

According to Reuters, the "startling economic costs" of obesity, which often are paid by non-obese individuals through higher premiums, could become "the epidemic's second-hand smoke." Policymakers began to address the problems associated with second-hand smoke when scientists discovered that nonsmokers were developing lung cancer and other diseases as a result of being exposed to smoke-filled air.

The federal health reform law will allow employers to charge obese workers who do not participate in qualified wellness programs 30% to 50% more for their health benefits, according to Reuters (Begley, Reuters, 4/30).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
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