Slowdown in Health Care Spending May be Here to Stay, Harvard Studies Suggest

By Editor,

Two new Harvard studies published May 6 in the journal Health Affairs have examined the causes of a dramatic slowdown in the growth of health care spending that the U.S. has experienced in recent years.

They have concluded that the spending slowdown may be due more to long-term systemic changes than to temporary belt-tightening from the recession, giving rise to hope that lower growth levels in health care spending may be here to stay.

One of the studies predicts that, if these trends continue, the U.S. government could save up to $770 Billion in projected health care spending over the next 10 years.

From 2009 through 2011, national health care spending per person grew by about 3 percent per year, only half the rate of the 5.9 percent spending growth per year experienced in the previous 10 years, according to one of the new studies, conducted by Harvard health policy researcher Michael Chernew and colleagues.

During the same period, growth in health care spending by large employers was even slower — growing by 1.4 percent in 2010 and by 2.1 percent in 2011.

This slowdown in health care spending has generally been attributed to temporary “belt-tightening” due to job loss and economic pain caused by the recession.

However, the new Harvard studies conclude that other, more long-term factors — such as “less rapid development of imaging technology and new pharmaceuticals, increased patient cost sharing, and greater provider efficiency” — may explain a majority of the slowdown. According to the studies, this gives cause for optimism that lower growth in health care spending may persist and could save Medicare and other government programs Billions of dollars through lower health care spending in coming years.

Chernew Study: Systemic Factors Other than Job Loss or Employer Benefit Cuts Account for Most of the Health Spending Slowdown

One by Harvard health policy researcher Michael Chernew and colleagues examined “two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people.”

They examined data on more than ten million enrollees in health care coverage provided by large firm employers during the period from 2007 through 2011.

They found that “these enrollees’ out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period.”

However, based on their analysis, the authors conclude that “such benefit design changes accounted for about one-fifth [20%] of the observed decrease in the rate of growth.” Their analysis found that even when they held benefit generosity constant, there still was a slowdown in health care spending growth among the enrollees studied.

The authors indicate that their research “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,” the authors conclude.

Cutler Study: Trend Could Cut Government Spending for Health Care by $770 Billion over the Next 10 Years

Another led by Harvard economist David Cutler found that “the 2007–09 recession, a one-time event, accounted for 37 percent of the slowdown [in health care spending] between 2003 and 2012.”

“A decline in private insurance coverage and cuts to some Medicare payment rates accounted for another 8 percent of the slowdown, leaving 55 percent of the spending slowdown unexplained,” the authors found.

“The evidence thus suggests at least as strong a case for structural changes as for cyclical factors,” as the primary explanation for the health care spending slowdown, the authors stated.

“We conclude 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,” the authors wrote.

Dr. Cutler and colleagues conclude, “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.”

More Information

Other studies have attributed part of the credit for the slowdown in health care spending since 2010 to the Patient Protection & Affordable Care Act, according to published by the U.S. Department of Health & Human Services.

For more news and information about the Patient Protection & Affordable Care Act, President Obama’s signature Health Care Law, and about health care reform, see the resource pages on , including:

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