Why A Slowdown In Health Spending Is Starting To Look Real

By Julie Rovner

Published May 6, 2013 at 4:46 PM EDT

So you know all that talk about how the boatload of money going to health care will bankrupt the nation if something isn't done soon?

Well, it turns out that while politicians were bickering, the problem started taking care of itself. Well, a little bit.

While not solved, the growth in health spending has definitely slowed. That's the consensus of a series of studies out in the past few week. The latest bunch are in this month's issue of the policy journal Health Affairs.

The first study, by a group of researchers from Harvard Medical School, found, like many researchers before them, that the slowdown in health inflation between 2009 and 2011 was due in large part to the lagging economy. Specifically, a combination of people losing health insurance during the recession and employers passing along more health costs to workers who still had coverage.

But unlike many previous studies, the researchers found that there are other things going on as well — things that could persist and keep health spending rising more slowly going forward. And how do they know? Because when they adjusted their results to account for the rising out-of-pocket spending by people with insurance, costs still rose more slowly than they had earlier in the decade.

So what might be causing this? The researchers have some theories. "This slowdown may be a reflection of broader trends toward slower diffusion of technology or more fiscally conservative practice patterns by health care providers," they wrote.

Similarly, a study out last month from researchers with the Kaiser Family Foundation and the Altarum Institute found that just over three-quarters of the recent slowdown in health spending has been due to the weak economy.

And some of the remaining 23 percent has been due to increased cost-sharing by individuals. But they also found that some of it (their study methodology did not allow this to be separated out) was due to other changes, including how care is paid for and delivered.

Finally, a third study, also in the current Health Affairs, and also from Harvard (although from the economics department rather than the medical school) quantifies the savings that could result from the slowing trends.

Those authors estimate that if less rapid development of imaging technology and new drugs, combined with increased patient cost-sharing and greater efficiency by health care providers continue, public health spending could be as much as $770 billion less than currently predicted. Businesses and individuals would see significant savings, as well.

"Such lower levels of health care spending would have an enormous impact on the U.S. economy and on government and household finances," wrote David Cutler (who advised President Obama as a candidate) and Nikhil Sahni.

But while some economists are beginning to speculate in public that slower health care spending might be here to stay, others are much more guarded in predictions that have been made – and proven wrong – in the past.

"We have seen this movie before," wrote Kaiser Family Foundation's Drew Altman and Larry Levitt in the Washington Post last month about their study. "The idea that we have licked the problem of health care cost increases is no more probable today than it was in the past. Our nation has made no fundamental change in how health care is paid for or delivered."