Studies: Slowdown in Health Spending Could Last Beyond Recession
The recent slowdown in health care spending -- which grew at a lower annual rate between 2009 and 2011 than it did in the last 50 years -- could continue even as the economy recovers from the recession, according to a pair of studies published Monday in Health Affairs, the New York Times reports.
The rate of health spending grew by 3.9% annually from 2009 to 2011, compared with an annual growth rate of between 6.2% and 9.7% from 2000 to 2007, according to federal data.
First Study Points to 'Fundamental Changes'
The first study was conducted by David Cutler, a Harvard health economist and former adviser to President Obama. It estimates that the poor economy was responsible for about 37% of the lower spending trajectory. As a result, Cutler said economists could be overstating health spending projections over the next 10 years by as much as $770 billion (Lowrey, New York Times, 5/6).
The study also found that Medicare spending cuts and a decline in private coverage accounted for 8% of the slowdown (Wilde Mathews, Wall Street Journal, 5/6). The remaining 55% was linked to "fundamental changes," such as:
- A decline in the development and adoption of new imaging equipment and costly prescription drugs;
- The expiration of prescription drug patents;
- Increased out-of-pocket costs through high-deductible health plans; and
- Greater care coordination.
According to Reuters, these trends could persist because one-sixth of prescription drugs will lose patent protection during the next five years and more surgeries are being done on an out-patient basis (Begley, Reuters, 5/6).
The study states that the findings suggest "at least as strong a case for structural changes as for cyclical factors" in the spending slowdown (Norman, Politico, 5/7).
Second Study Cites Higher Out-of-Pocket Costs, Other Major Factors
The second study was conducted by Harvard Medical School's Michael Chernew and colleagues (Wall Street Journal, 5/6).
Researchers examined claims data for 10 million individuals enrolled in large employer plans and found that higher out-of-pocket costs accounted for about 20% of the slowdown by those plans in 2010 and 2011, suggesting that much of the slowdown can be attributed to other reasons (Politico, 5/6).
Researchers said other major factors contributing to the slowdown included lower Medicare payment rates, slower development of new medical devices and prescription drugs, and new ways insurers are reimbursing providers, such as "bundled payments" (New York Times, 5/6).
The researchers wrote that those "current trends" led them to have "cautious optimism that the spending slowdown may persist" (Rau, "Capsules," Kaiser Health News, 5/6).
Studies Counter Other Recent Research
The two studies counter recent Kaiser Family Foundation research that found the poor economy accounted for a majority of the decline in health spending (Wall Street Journal, 5/6).
The KFF study showed that the recession and poor economic recovery accounted for 77% of the factors that contributed to the recent slowdown in national health care spending, while just 23% resulted from changes in the health care system, such as higher deductibles and other cost-sharing strategies made by insurers and medical providers (California Healthline, 4/23).
Meanwhile, a paper by Urban Institute researchers John Holahan and Stacey McMorrow released on Monday by the Robert Wood Johnson Foundation cast doubt on whether the slowdown would last.
The researchers wrote, "Health spending growth has rebounded after every major attempt at cost containment and this creates understandable skepticism that the most recent slowdown will be lasting" ("Capsules," Kaiser Health News, 5/6).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.