WASHINGTON: The growth of health spending has slowed substantially in the last few years, surprising experts and offering some fuel for optimism about the federal government’s long-term fiscal performance.
Much of the slowdown is the result of the recession, and thus not unexpected, health experts say. But some of it seems to be caused by changing behavior by patients and the medical institutions and people that serve them — meaning that the lower rates of growth might persist even as the economy picks up.
Because Medicare and Medicaid represent two of the largest contributors to the country’s long-term debts, slower growth in health costs could reduce the pressure for enormous spending cuts or tax increases.
In 2009 and 2010, nationwide medical spending grew at less than 4 percent a year, the slowest annual pace in more than five decades, according to the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health spending held steady in 2010, at 17.9 percent of gross domestic product.
The growth rate mostly slowed as millions of Americans lost insurance coverage along with their jobs. Worried about job security, others may have feared taking time off work for doctors’ visits or surgical procedures, or skipped care that wasn’t urgent when money was tight.
Still, the slowdown was sharper than health economists expected, and a broad, bipartisan range of academics, hospital administrators and policy experts have started to wonder whether what had seemed impossible might be happening — whether doctors and patients have begun to change their behavior in ways that bend the cost curve.
If so, it was happening just as the new medical law was coming into force, and before the Supreme Court could weigh in on it or the voters could have their say at the polls.
“The tectonic plates might be beginning to shift,” said Karen Davis, president of the Commonwealth Fund, a nonprofit research group in New York. “It’s hard to believe everything that’s been tried over the last decade to slow spending wouldn’t be making a difference.”
Experts were surprised, for instance, at a drop in spending on some hospitalized seniors — people enrolled in Medicare, whose coverage the recession should not affect. They also noted that some of the states where medical spending slowed most rapidly were not hit particularly badly by the recession, suggesting that other factors were at play.
“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Barack Obama. “I think there’s much more going on.”
The implications of a bend in the cost curve would be enormous. Policymakers on both sides of the aisle see rising health-care costs as the central threat to household budgets and the country’s fiscal health. If the growth in Medicare were to come down to a rate of only 1 percentage point a year faster than the economy’s growth, the projected long-term deficit would fall by more than one third.
The growth of health costs slowed in the 1990s as health maintenance organizations became more popular. That played a role in gains in household income — less money on employer-provided benefits means more money for raises — and in budget surpluses, economists argue.
Some experts caution that there remains too little data to determine whether the current slowdown will become permanent, or whether it is merely a blip caused by the economy’s weakness.
“If there’s something else going on, we don’t know what it is yet,” said Gail Wilensky, a health economist who headed Medicare and Medicaid during the administration of President George H.W. Bush. “The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and three, you’d be foolhardy to say that we can understand it.”
She argued that the unusual decline in not just income, but wealth, during the recession might be one factor cutting down on use of the health-care system.
But many other health experts say that there is just enough data to start detecting trends — even if the numbers remain murky, and the vast complexity of the national health-care market puts definitive answers out of reach.