U.S. Health Care Spending Capped

U.S. health care spending grew 3.6% in 2013, capping a five-year stretch of historically low growth, the Centers for Medicare and Medicaid Services said in December.

That’s good news for health care payers, but is the slowdown — which was the smallest increase since 1960 — sustainable?

What we’re seeing is “a slowing down of what was perhaps unsustainable” increases in the cost of health care, said Elise Gould, senior economist and director of health policy research at the Economic Policy Institute, a Washington-based think tank.

Health care spending rose at or below 4.1% per year from 2009 through 2013, CMS reported in the journal Health Affairs in December. That’s a far cry from the double-digit spikes of the late 1980s and early 1990s and the high-single-digit increases of the early 2000s.

Still, increases in health care spending outpaced the U.S. inflation rate of 1.3% for the 12 months that ended in November.

“We’ve talked about it being a new normal, that the days of double-digit inflation are unlikely to return soon” for health care prices, said Mike Thompson, New York-based principal and health care practice leader at PricewaterhouseCoopers L.L.P.

Mr. Thompson said the growing consumerism movement, hastened by the Patient Protection and Affordable Care Act’s upcoming 2018 excise tax on high-cost health plans, will factor into controlling future health spending.

Charles Roehrig, vice president and director of the Center for Sustainable Health Spending, a research arm of Ann Arbor, Michigan-based nonprofit health care consultant Altarum Institute, said sluggish growth in health care prices and other effects of the recession were key contributors to the five-year slowdown in health care spending.

He noted that the ACA’s productivity adjustment factor to ratchet down Medicare payment rates to hospitals is having a wider effect because commercial payers are following Medicare’s lead and negotiating lower rates, too.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary