Health Spending will Stay Low

It’s no secret that health care spending has been down, but it doesn’t look like that should improve any over the next few years, according to an article in the New England Journal of Medicine.

According to “When the Cost Curve Bent — Pre-Recession Moderation in Health Care Spending,” the low growth rate of U.S. health care spending isn’t a result of the recession. In fact, spending was low years before. Spending moderation began as early as July 2005, well before the recession, which began at the end of 2007.
Authors Charles Roehrig, PhD, Ani Turner, BA, Paul Hughes-Cromwick, MA, and George Miller PhD, used data from the Bureau of Economic Analysis and the National Health Expenditure Accounts to determine “excess” health care spending growth, which is the gap between the growth in such spending and that of full-employment gross domestic product.
“Our analysis shows that cost moderation predated the recession by about 2.5 years, so the bend in the curve cannot be attributed solely to the economy,” wrote the authors. “In fact, there was lower excess spending before the recession than after it…”
Average Growth of Personal Health Care Spending in Excess of Potential GDP, with Component Effects for Selected Periods. “When the Cost Curve Bent — Pre-Recession Moderation in Health Care Spending.” NEJM.

A year ago, an article in Health Affairs estimated that health care spending in the U.S. would gradually grow from 2011 to 2013 and then grow even faster after major coverage expansions from the Affordable Care Act (ACA) take place in 2014. However, the NEJM article suggests that isn’t the case.

Excluding a one-time jump when ACA expands coverage, the study’s authors expect excess growth will remain significantly below 1% over the next few years, which would mean excess growth would stay even to its current level.

The authors admit that this research isn’t definitive and doesn’t separate cyclical factors, such as elevated unemployment rates, from structural factors, such as changing physician practice and employment patterns.

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