American health care spending has significantly slowed down over the past few years, with some of the lowest rates of growth in over 50 years, according to a recent report by the Kaiser Family Foundation and the Altarum Institute.
Between 2001 and 2003, health care spending in the U.S. was increasing at an annual rate of 8.8%. However, new data reveal that between 2008 and 2012 spending has increased by less than half of that, at only 4.2% annually. Total health care spending was $2.8 trillion in 2012.
The researchers at the Kaiser Family Foundation and the Altarum Institute’s Center for Sustainable Health Spending used a statistical model to see whether there was any association between the general economy and health care spending.
After thorough analysis they identified that health spending fully responds to changes in the economy, indicating that the recession of 2007-2009 was the main factor that caused the slowdown.
According to the report “about three-quarters (77%) of the recent decline in health spending growth can be explained by changes in the broader economy.”
Another major factor that contributed to this slowdown is the recent major structural change made to the U.S. health care system.
They added that in 2014, when millions of uninsured Americans will have access to health coverage – through the Affordable Care Act – there will be a one-time increase in health spending by two or three percentage points. However, they added that medicare savings and taxing health plans will likely lower spending in the long run.
They anticipate that the Recession will continue to have lingering effects on health care spending for a few more years until the economy fully recovers, when health spending will return to increasing at annual rate of around 7%.
In a recent opinion segment in theWashington Post, the KFF President Larry Levitt and CEO Drew Altman, said: “We need to be realistic about the fact that health spending will start going up more rapidly again as the economy improves.”
In their report, the authors concluded:
“As the economy recovers, health spending is likely to trend upwards, though growth rates are unlikely to return to the double-digit levels we have seen in the past. Future health spending increases will also depend on whether “excess” health costs remain at the relatively modest level of recent years or return to the historical norm.
History suggests that previous efforts to control health care costs have had only a temporary effect, and there are initial signs that the recent slowdown (independent of the effects of the economy) is beginning to wane.”
It should be noted that although healthcare spending only rose by 4% in 2009, it still totaled $2.49 trillion ($8,086 per person), or 17.6% of the American economy. Whereas in 2008, healthcare spending represented 16.6% of the US economy. This indicates that health spending growth continues to outpace overall economic growth.
Written by Joseph Nordqvist