Healthcare spending reflects economic woes

The good news is healthcare spending has been growing at historically low rates in recent years. The bad news is that it is largely a result of the slumping economy. The National Health Expenditure Accounts (NHEA) reports that national health spending has been growing steadily at a rate of 3.9% each year from 2009 to 2011. This represents the lowest rate of growth since the federal government began keeping such statistics in 1960. A report from the Center for Sustainable Health Spending at the Altarum Institute suggests healthcare spending jumped slightly in 2012 to 4.3%. However, it is still far off the double-digit growth of the late 1980s and early 1990s. According to analysis performed by the Kaiser Family Foundation, 77% of the decline in healthcare spending can be blamed on broader changes in the economy, mainly the Great Recession of 2007-2009. Which means as the economy recovers healthcare spending will increase accordingly. The growth in healthcare spending will likely be accelerated as more people become insured under the Affordable Care Act (ACA) starting in 2014. The authors project a one-time increase of two to three percentage points in health spending growth as more people become insured under the ACA. The authors said structural changes to the health system may be playing a modest role in the cost containment; however it is difficult to determine which have had the greatest impact. This fact could be troubling for proponents of the ACA. Many believe the success of the national healthcare bill is dependent on the ability to “bend the healthcare cost curve.” There are several cost-containment provisions contained in the Affordable Care Act that may help retard the growth of healthcare spending including, changes to Medicare’s payment structure and taxes on high-cost “Cadillac” employer-sponsored health plans. But authors of the study say “the economy is by far the biggest determinant of changes in health spending overall”. It remains to be seen whether those provisions will sufficiently contain healthcare spending or whether the national government will need to draft legislation similar to the Massachusetts healthcare cost containment bill passed last summer.