In recent years, the growth of healthcare spending has slowed not only in the U.S. but also globally. In a viewpoint article published in The Journal of the American Medical Association, Commonwealth Fund Senior Researcher David Squires explores potential reasons for the deceleration.
Here are five things to know about healthcare spending growth.
1. Healthcare spending growth hit an all-time low of 3.6 percent for 2011 and remained slow at an annual rate of 3.7 percent in 2012 and 4 percent during the first 11 months of 2013, according to the Altarum Institute’s Center for Sustainable Health Spending and CMS.
2. Spending growth began to pick up last year, growing 5.6 percent year-over-year in the fourth quarter. At the time, that was the highest growth rate recorded since 2004. Earlier this year, the Bureau of Economic Analysis released data suggesting the growth rate would climb even further to 9.9 percent year-over-year. However, a BEA report released this week showed healthcare spending declined by 1.4 percent on the year during the first quarter of 2014. The GDP shrank by 2.9 percent year-over-year due to various factors, including a smaller-than-expected increase in personal consumption expenditures (including healthcare) and a larger-than-expected decline in exports.
3. According to Mr. Squires’ analysis, the healthcare spending growth slowdown has occurred in other industrialized countries as well. In 2010 and 2011, “excess” healthcare spending growth (the degree to which spending exceeds the growth of the economy) was either negligible or negative in not just the U.S. but also a number of other industrialized countries. According to data from the Organisation for Economic Cooperation and Development, the median excess growth rate for 23 countries in 2011 and 12 countries in 2012, including the U.S., was negligible or negative.
4. This finding suggests that whatever caused the U.S. spending growth deceleration also affected other countries, Mr. Squires writes. The biggest potential explanation is the 2007 to 2009 financial crisis. However, a slowdown in the introduction of new technology could also have affected spending growth internationally. Still, the generally higher adoption rate of new health technologies in the U.S. suggests that this isn’t the primary deceleration factor, given the “tight international correlation” in excess spending growth, according to Mr. Squires. Furthermore, other, unmeasured influences may also affect health spending in the U.S. and globally.
5. The White House has predicted healthcare spending growth in the U.S. will accelerate in the near future due to a rise in utilization as millions gain coverage under the PPACA, despite the decline in the first quarter. Earlier this year, in response to the BEA’s initial first-quarter estimates, the White House indicated in a blog post that the expected increase in utilization is drive by greater use of healthcare services by people gaining coverage. Seeing that ensuring access to care is a primary goal of the reform law, the expected rise in utilization and spending “is neither a surprise, nor a cause for concern,” according to a White House blog post.