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The public policy blog of the American Enterprise Institute
The White House is trumpeting as “historically unprecedented” the recent slowdown in healthcare spending, while also suggesting that the Affordable Care is playing a big role. From 2010 through 2012, the real per capita annual growth rate of national health spending was just 1.3%, less than one-third of the long-term historical average growth rate of 4.5%. It was also way below the average 2000-2007 growth rate of 3.9%. All of which is good fiscal news, helping reduce projections of future Medicare and Medicaid spending by through 2020 by $147 billion.
So what is driving the slowdown? AEI’s Joe Antos:
A major reason for the slower growth is the sharp recession in 2007-09, followed by the anemic recovery. TheKaiser Family Foundationestimates that 77 percent of the slower growth is due to the weak economy. Slower spending growth primarily due to a poor economy and high levels of joblessness is not a welcome trend.
Other analysts dispute the importance of a slow economy in reducing health spending growth. One can debate the numbers. One cannot debate that federal policy has not been successful in bringing the economy back to life.
The Congressional Budget Office attempted to discover what is causing the slowdown in Medicare spending, and essentially came up empty-handed. Without a clearer understanding of what is going on, it seems risky to assume that the slowdown will continue well into the future-and ill-advised to base policy on that assumption.
And as I have written: a) lots of breakthrough drugs from the 1980s and 1990s became widely available in generic form in the 2000s; b) health insurance plans became more diverse, giving consumers more choice, such as health savings accounts; c) the IT and networking revolution has improved disease management. And along those lines is a JPM analysis focuses particularly on the increase in high-deductible, employer-provided health insurance, frequently paired with a health savings account. In 2012, 9% of workers with insurance from an employer were enrolled in a high-deductible plan — more than double the percentage from just three years ago. The product may be limiting consumer demand:
One circumstantial piece of evidence that this may be holding back spending is the composition of health care consumption. Higher deductibles may make one think twice about elective care for annoying but not debilitating conditions, whereas it probably won’t do much to deter one from visiting the hospital for a serious or life-threatening condition. Such a pattern appears in the recent data, as outpatient care has slowed markedly, whereas hospital care is expanding at about pre-recession levels.
As for Obamacare, I wouldn’t rule out that is now having an impact. We’ll see.
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