bob harwig hospitalThe recent slowdown in health care spending can only be partly attributed to the economy downturn according to a new study from the Kaiser Family Foundation.

Over the past several years health care spending has grown noticeably slower than it has over the last several decades. The big question though is whether this slowdown is purely a byproduct of the recession or the result of changes in our health care system. According to the study, while much of the slowdown is due to the overall economic downturn it is likely not the only cause.

Our analysis suggests that the vast majority (77%) of the recent decline in the health spending trend can be attributed to broader changes in the economy. At the same time, however, there are also indications that structural changes in the health system may be playing a modest role as well. “Excess” health growth in recent years has fallen to levels similar to the mid to late 1990s when managed care was spreading rapidly. This could be due to continuing changes in the way health care is delivered, but also to rising levels of patient cost-sharing in private insurance plans that discourage use of services. While discussions in the health community have focused more on changes in delivery, it is difficult to determine which of these developments is having a greater impact.

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.

While only 23 percent of the slowdown being the result of health care specific factors may seem small, it is still very significant. What is often most important for the long term budget projections is not how fast health care grows but how much faster it grows than the rest of the economy.

Assuming that “excess” health care growth remains slow, which is a big assumption, deficit projections would improve significantly.

Photo by Bob Harwig released under Creative Commons License