This post was written by OK Policy volunteer Zoraya Hightower. Zoraya completed her undergraduate degree at the University of Tulsa and this fall will begin a Master of Environmental Management at Yale.
America spends more than any other nation on health care. In 2011, health care spending accounted for 18 percent of U.S. Gross Domestic Product. Yet, we have millions who lack health insurance and our health outcomes are barely average compared to other OCED countries: in short, we pay too much for too little.
As much as America spends now, future health care spending is of even greater concern. Health care costs historically grow far more quickly than the rest of the economy. Increasing health care costs tend to corrode our employer- sponsored insurance system, increase the number of uninsured, drain workers’ wages, reduce funding for other allocations, and strain federal and state budgets. Of particular concern is the effect of health care programs such as Medicare and Medicaid on the ever-growing federal deficit.
Source: Kaiser Family Foundation
Yet, amidst all of these well-known and frightening figures there seems to be a breath of fresh air. The growth of health care costs and overall health care spending have slowed significantly in the last four years, continuing a trend that began in the early 2000s. Health care spending growth over the last four years has been at its lowest since the federal government began tracking these statistics in 1960. From 2008 – 2012, spending growth rates have averaged 4.2 percent, a 4.6 percentage point decrease from the peak reached in 2001 – 2003 (see figure). Instead of outpacing the rest of the economy, health care has grown at the same rate.
The greatest dip in health care growth rates coincides with the Great Recession that began in 2008. The recession’s effects included a decrease in health care service utilization spurred by job loss and benefit changes. This downward pressure on demand decreased both overall health care spending as well as general health care costs.
Although the recession is a likely explanation to the growth slowdown, it does not appear to explain the entire phenomenon. Health care spending growth began decreasing in the early 2000s and has remained low through 2013, beginning before and lasting well beyond the official recession. Therefore, other more fundamental factors, such as innovation, efficiency and the Affordable Care Act (ACA), may also be playing a significant role.
continue reading Health care spending slowdown warrants sigh of relief