The Exponential Growth in U.S. Health-Care Spending Is Slowing, and It's Not Because of the Recession

The recession had almost no effect on health-care costs, a new analysis shows. 

When people talk about how health care is getting more expensive, they're generally referring to rising insurance premiums and the danger that a single visit to the hospital could wind up bankrupting a family. Over the long term, they're right to worry. But how fast costs are growing isn't preordained by any means. Have a look at this chart, from the New England Journal of Medicine:

In the depths of the recession, health-care spending's rate of growth -- represented by the black solid line -- actually turned negative, meaning that costs were shrinking in 2008 and for much of 2009. That's precisely when the worst of the recession hit the United States. But was the recession responsible for suppressing the rise of health-care spending?

Actually, the economic crisis appears to have done very little to bend the so-called "cost curve" of health care for the better:

Our analysis of monthly data on health care spending shows that the moderation in growth began well before the recession and has continued through May 2012.

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Excess growth decreased from more than 3% during 2003 to less than 1% starting in July 2005 and continuing, for the most part, until near the end of the recession in June 2009. Excess growth exceeded 1% during the post-recession period, until May 2011, when it again dropped below 1%, going negative during the latter part of that year. If we use 1% as a threshold to denote moderation in excess health care spending, these data show that July 2005 marked the onset of moderation.

Specifically, sharp declines in personal health-care spending -- which make up a significant chunk of overall spending (even though it excludes things like insurance) -- in the two years before the downturn contributed a lot to the general decrease in spending that became even more pronounced during the recession itself.

If health-care spending was already falling prior to the recession, the researchers say, that's a sign that the effects of long-term industry trends are beginning to kick in. Some of these include the coming expiration of many prescription drug patents, changes in the way we get our health care delivered, and shifting patterns of employment among doctors.

Positive as this report may be, in absolute terms costs are still astronomical, and the system remains in desperate need of reform.