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Health Care Cost Growth May Be Slowing Long-Term, New Studies Show

Health care remains one of the nation's most contentious issues. (Image credit: Getty Images North America via @daylife)

by Frederick E. Allen, Forbes Staff

Finally there may be some good news about the cost of health care in America. Over the last few years costs have been going up more slowly, but this has generally been attributed to the recession: People and employers alike have had less to spend on medical matters. Now two studies in the new issue of Health Affairs suggest there may be deeper and longer-lasting causes for the slowed growth, which could add up to savings of hundreds of billions of dollars in coming years.

In one study, four Harvard Medical School researchers note that between 2009 and 2011, health care spending grew about 3% a year, after having risen at an average of 5.9% a year for the decade before that. Looking at data from 10 million people with health care plans from large companies, they found that changes to the plans and to the enrollees’ out-of-pocket expenses accounted for only about 20% of the slowing. And spending growth slowed

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 US health spending projections and fiscal challenges facing the country.

A companion study by two Harvard economics professors concludes

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 US economy and on government and household finances.

As Brian Beutler at TPM points out, “that $770 billion is equivalent to about three-quarters of sequestration’s mandatory, indiscriminate spending cuts. . . . The paper implies that budget deficits will shrink by an amount similar to sequestration even if Congress were to simply rescind it.”

Where does Obamacare fit into all this? As Beutler also writes, “The new papers don’t explicitly credit the ACA [Affordable Care Act] for slowing down spending growth, but many experts — particularly those that support the law — believe it is a contributing factor.”

Nonetheless, health care costs are still rising faster than wages, and the system remains out of wack. There is too little in the ACA to rein in the rise of health care costs—even if there is more there than in any other reform anyone has seriously suggested.

Find an overview of the May issue of Health Affairs and its studies here.


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