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What’s behind the slow rise of health care costs? Our pocketbooks

Dan Gorenstein May 7, 2013

What’s behind the slow rise of health care costs? Our pocketbooks

Dan Gorenstein May 7, 2013

You don’t need me to tell you that health care spending knows only one direction: Up.

But here’s some good news: It’s not going up as fast as it used to. Between 2009 and 2011, spending grew at its slowest rate in 50 years.

And some new research suggests this could be the start of a beautiful new trend that could shave nearly a $1 trillion off the national debt in less than a decade.

“Cautiously optimistic,” that’s how some of the top people in healthcare put it when they analyze the spending data. Before the recession, total health care spending grew every year between 6 and 9 percent.

The last four years it’s been 3 to 4 percent.

“Now, we don’t really know with great precision what’s responsible for that,” says Drew Altman, president of the Kaiser Family Foundation. Altman says health policy folks all agree the recession is part of the answer — lose your job and you’re less likely to see the doctor.

But several reports in the last few weeks say there’s more to it.

Harvard Medical School Prof. Michael Chernew, who co-authored a study in Health Affairs, says the culture is shifting.

“There are physicians and administrators around the country, asking themselves, how are we spending our money and how can we spend less of it and still provide high quality care,” says Chernew.

New health insurance contracts and federal incentives are encouraging doctors and hospitals to think twice before ordering that second MRI or extra night in the hospital.  

Chernew believes payment reforms are doing what they’re supposed to, squeezing out the additional costs.

Harvard economist David Cutler, who authored a separate Health Affairs report, says there’s another reason costs are dropping: people with insurance can’t afford to see the doctor as much.  

“A typical individual with a policy from a small employer has a deductible of over $1,000. And for a family it’s probably $2,000 – $3,000. To put this in perspective that more money than most people have in the bank,” he says.

One of the reasons Cutler thinks the trend of slowing health care spending may be sustainable is because you and me have more skin in the game. The higher the deductible, the more the co-pay, the less we spend.

And Cutler says that’s a mixed bag. Maybe there are fewer wasteful tests, but it can also mean less preventive care.

“Over time, if you don’t treat people’s risk factors they will go on to develop heart disease, cancer and so on. We need to be careful between thinking that spending less on healthcare is good, which it is. But then therefore saying that anyway you spend less is obviously good, which is not true,” says Cutler.

Cutler says the data suggests there’s reason to believe the nation is making some headway on slowing the growth of health care costs.

But he quickly adds much more work is needed.

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