May 21, 2012 at 11:39 pm
I’ve been working on a health care presentation that I’ll post tomorrow, but first I wanted to note this piece in today’s Wapo on recent trends in health care spending for persons under 65 with employer-sponsored insurance (ESI). The numbers are notable because they’re derived from a very large database provided by the insurers who carry the private policies for the employers—such data have historically been hard to come by.
One finding that caught my eye was the slowing of health care spending in 2010. After growing about 6% per year in 2008 and 2009, health spending per insured person on ESI rose 3.3% in 2010 (see table 1 here).
Readers may recall this recent post wherein I wondered if a report on this slowing health spending phenomenon was cyclical or structural. That is, are people spending less because their incomes are down in the recession, implying growth rates will eventually bounce back? Or is some more fundamental change underway “bending the cost curve” in ways that will generate lasting savings?
I hypothesized mostly the former. I don’t yet see the kinds of structural changes in place that would alter incentives of patients, providers, and insurers, though let’s hope such changes are forthcoming through the Affordable Care Act (more on that tomorrow). And, in fact, utilization is down, not price.
The paper from which the WaPo data are drawn favors the cyclical explanation as well, though they note a price elasticity is also in play:
It is likely that much of the dip in utilization is connected to the recent recession and sluggish recovery. Faced with a loss of income, wealth, or job security, patients could be putting off non-urgent care.
But many analysts argue the drop-off is too significant to be accounted for by economic factors alone. And Monday’s report also fleshed out details of another possible explanation: The rising price patients must pay for care.
So we’ve got recession-induced falling incomes bumping into faster growing prices for health services. Add in increased cost-shifting from employers to workers and you’ve got a pretty good recipe for lower overall spending.
We won’t be able to answer the cyclical/structural question until incomes recover, but in the meantime, here’s another good question. If health care spending is truly slowing in a lasting way, that would provide extremely valuable relief from the relentless costs pressure of recent decades. The implications for the national economy and our fiscal challenge would be hugely positive.
But we’ll have to dig deeper to see which patients are foregoing care, and why. If financing efficiencies and better aligned incentives are at work, great. If people who need care can’t afford it, not so good.
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