The record slow growth rate in healthcare spending in recent years is the result largely of economic factors beyond the health system, with the economic recession and its fallout explaining 77 percent of the slowdown, according to a report released Monday by the Kaiser Family Foundation and Altarum Institute. If the economy strengthens as anticipated, healthcare spending will also accelerate, the two organizations concluded.
[See also: 2011 healthcare spending growth at 52-year low]
The remaining 23 percent may be explained by changes in the way healthcare is being delivered, such as more managed care, and increasing cost-sharing by patients, such as higher deductibles, in private insurance that discourage use of services, the analysis said.
Forecasting whether the healthcare spending slowdown is long term or temporary has major implications for policy, since health spending growth is a major driver of federal and state budgets through the Medicare and Medicaid programs, as well as the tax exclusion for employer-sponsored insurance.
National health spending totaled $2.8 trillion in 2012. A small difference in the rate of growth can lead to significant differences in spending over time, the analysis said.
The Centers for Medicare & Medicaid Services Office of the Actuary has reported that national health spending grew by 3.9 percent annually from 2009 to 2011, the lowest rate of growth since the federal government began keeping such statistics in 1960.
[See also: CBO's latest budget forecast finds growth of healthcare spending still rising slowly]
Estimates from the Altarum Institute suggest that the slowdown largely continued into 2012, with health spending growing by 4.3 percent last year. The Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits Survey shows similar moderation, with premiums in employer-sponsored health plans increasing by 4 percent in 2012.
History has shown that previous efforts to control healthcare costs have had only a temporary effect, such as when managed care was spreading in the mid- to late-1990s.
As the economy and inflation ramp up, even with no change in health costs, “the lagged effect of the economy alone … will gradually add 3.5 percentage points to the annual growth rate in health spending by 2019,” the analysis said.
Changes coming under the Patient Protection and Affordable Care Act (ACA) could also affect trends significantly. Increases in coverage will produce a one-time bump of a couple percent in spending as previously uninsured individuals get coverage and better access to health services.
“This will likely coincide with an expected economic recovery, so higher growth rates in health spending due to that recovery should not be attributed to the ACA simply because of the coincidental timing,” the analysis said.
On the other hand, Medicare savings included in the ACA, which are primarily achieved through smaller increases in payments to providers, have yet to be realized and will lower the future growth in spending in that program. And changes in the delivery system, including through accountable care organizations (ACOs) and bundled payments to providers may also yield results and help to contain health costs in public and private insurance, the report said.