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Slower Growth in Health Spending Predates Recession

By David Pittman, Washington Correspondent, MedPage Today

The slowdown in the growth in health spending predated the recession that started in late 2007 by almost two-and-a-half years, one analysis showed, giving credence to the notion that the dip cannot be pinned solely on the economy.

Furthermore, the slowing in the growth rate that started in mid-2005 appears to be continuing, according to the analysis published on-line Wednesday in the New England Journal of Medicine from the Altarum Institute’s Center for Sustainable Health Spending in Ann Arbor, Mich.

“Excess growth” fell from greater than 3% in 2003 to less than 1% in July 2005 — 2.5 years before the begin of the recession. The researchers used excess growth of less than 1% to denote moderate growth in health spending.

During the recession, growth was a mere 0.4% and has averaged 0.9% post recession.

To correct this, the Michigan researchers defined “excess” health-care spending growth as the gap between the growth in health spending and potential GDP, which captures more long-term trends.

“One could argue that the poor economy had nothing to do with slower growth in excess personal health-care spending,” Charles Roehrig and colleagues wrote.”We do not adhere to that extreme view but do put more weight on structural factors.”

In terms of personal health spending, spending on doctor and clinical services has grown especially slowly since 2005. The authors attribute it to physician-payment rates relative to overall economic prices. While certain policies have discouraged high levels of using doctor services, doctors can anticipate a bump in utilization of their services in 2014 when millions of Americans gain coverage under the Affordable Care Act (ACA).

After the recession ended — tabbed as mid-2009 — spending growth has been highest for hospital services, while the growth in doctor and clinical services has actually shrunk.

The huge culprit in health spending growth over the time period has been in “nonpersonal healthcare” — which includes administrative costs for government health insurance, the net costs of private insurance, research, structures and equipment, and the like.

Roehrig and colleagues anticipate excess growth will remain below 1% for the next few years except for a one-time bump in early 2014 from expanded coverage under the ACA.

The analysts used “excess growth” rather than the typical easy growth in gross domestic product (GDP) to measure economic health against because the easy comparison gives a false sense of spending during recessions and recoveries. It points more to low GDP growth than to high growth in health spending.

Although elevated unemployment rates undoubtedly share some of the blame, the investigators stated more research is needed to pinpoint the factors responsible for the slowdown. Changing doctor practice and employment patterns, and increases in patient cost sharing are undoubtedly factors, they acknowledged, but there may be others.

is MedPage Today’s Washington Correspondent, following the intersection of policy and healthcare. He covers Congress, FDA, and other health agencies in Washington, as well as major health-care events. David holds bachelors’ degrees in journalism and chemistry from the University of Georgia and previously worked at the Amarillo Globe-News in Texas, Chemical & Engineering News and most recently FDAnews.

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Submited at Friday, August 10th, 2012 at 12:15 am on Uncategorized by admin
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