Health Care Spending Slowing, but Still Growing

The United States continues to have the highest per capita health care spending among industrialized countries, but a new study published in the journal Health Affairs suggests we might finally be turning the tide.

The rate of growth in U.S. health care spending slowed for the third straight year in 2005. The study's authors, who work for the centers for Medicare and Medicaid Services, say this marks the slowest growth rate in health spending since 1999, when enrollment in more tightly managed care plans peaked.

But while this is a positive development, the bottom line is that the spending may continue to increase, despite the slowdown.

"Every year, when rates-of-spending increases are slightly lower than the year before, some people try to spin this as good news," said Alan Sager, professor of health policy and management and director of the Health Reform Program at Boston University School of Public Health. "What it really means is that we're driving at high speed toward the edge of the cliff, but not quite as quickly as last year. Is this drop in speed meaningful? No."

Others agree that we need to be cautious.

"Any celebration is premature," said Karen Davis, president of the Commonwealth Fund, a private foundation that aims to promote a high-performing health care system. "The United States still spends a staggering $6,697 per person per year on health care, more than twice what any other industrialized country spends. And even the slower spending growth of 6.9 percent continues to outpace inflation and growth in wages for the average worker in the United States."

Behind the Slowdown

The health care spending slowdown was not unexpected.

"The slowdown was expected and is important," said Gail Wilensky, an economist and senior fellow at Project HOPE, a private organization that works to achieve sustainable advances in health care around the world. "But whether this slowdown will continue is another matter. Many of the changes are likely to be either 'one-off' or of limited duration."

The slowdown in health care spending also reflects the overall state of the economy.

"This trend represents a normal path in the cycle of health care spending growth and relative decline," said Leif Haase, senior program officer and health care fellow at The Century Foundation, a nonprofit organization.

"The article is significant in showing the relationship between trends in health care spending and in the overall economy," said Robert Field, associate professor and chair of the Department of Health Policy and Public Health at the University of the Sciences in Philadelphia. "Unemployment is a major predictor of health status; therefore health care spending rises in down economies and falls in good ones."

"The slowing in spending growth likely reflects recent improvements in economic growth and employment," Field added.

In light of this, some observers say the slowdown is probably linked to the most recent recession.

"The article suggests [the slowdown] is a typical time-lag with the 2001 recession, and the pattern has been seen before," said Norman Daniels, professor of ethics and population health at the Harvard School of Public Health.

In addition, the fact that consumers spent less on prescription drugs -- partly because of increased use of generic alternatives -- may have also helped put the brakes on rising health care costs.

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