Health cost moderation predated recession; holds hope for future

A new study in the New England Journal of Medicine finds that recent “curve bending” reductions in health spending growth started before the recession. Economists had suggested that the recent moderations in health costs were simply a result of the overall economic downturn and would skyrocket again as the economy picks up. But better adjusted numbers show that US health cost inflation started declining in 2003, well before the 2008/09 recession. While it decreased significantly during the recession and rebounded as expected when the recession ended, both overall and more recent cost trends are down. The 2010/11 increase in health costs post-recession was driven mainly by a large increase in hospital spending, dwarfing even the 2006 addition of prescription coverage to Medicare. Physician payment growth has been low throughout the decade, below general inflation at several points. Beyond implications for measuring true health cost trends, this finding suggests that the health care system has productively addressed skyrocketing costs, through structural changes such as generics, patent expirations, fewer blockbuster treatments, payment and delivery reforms. In the future, health care inflation may track general inflation more closely, relieving pressure on the economy, government programs, businesses and households.