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The Global Slowdown in Health Care Spending Growth FREE ONLINE FIRST

David Squires, MA1
[+] Author Affiliations
1The Commonwealth Fund, New York, New York
JAMA. Published online June 26, 2014. doi:10.1001/jama.2014.7221
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Published online

Increasing health care spending has been part of the US economy for decades, consuming an ever-increasing share of gross domestic product. However, in the past several years, the growth of US health spending has slowed to well below its historic norm.1 This slowdown in the rate of spending growth predates implementation of the Affordable Care Act.

The causes of the slowdown in the growth of health care spending have been widely debated by researchers and policy makers. Does the slowdown reflect merely short-term effects of the financial crisis of 2007-2009 and subsequent years of slow economic growth? Have changes in the health care system more fundamentally altered the mid- and long-term cost trajectory?2 The implications matter, as a sustained slowdown in health care spending growth would significantly improve the US fiscal outlook.

One consideration that has been largely overlooked in this debate is that the 2007-2009 financial crisis precipitated a deep global recession in which the economies of many industrialized countries shrank far more than in the United States. The variation in countries’ experiences during and after this period—including the effect on health care spending—provides a useful perspective for understanding the US experience.

Data published by the Organisation for Economic Co-operation and Development (OECD) allow for such a cross-national health spending comparison. As is well known, health spending in the United States far exceeds that in the rest of the industrialized world, making up nearly twice as large a share of the economy as in the median OECD country.3 However, health spending in all countries has increased over the past several decades, as nations have become richer and as medical technology has advanced.4

One useful way to assess a country’s health care spending growth is by measuring the degree to which it exceeds growth of the economy—what has been termed excess health spending growth (Figure).6 In the 1980s, US excess growth far exceeded the OECD median excess growth. Over the past 20 years, however, the US and OECD median rates of excess growth have tracked each other quite closely. Furthermore, in recent years, rates of excess health care spending in the United States and OECD have declined below their historical norms; in 2010 and 2011 (and 2012 for countries with available data), excess spending was either negligible or negative. The slowdown in health care spending growth has been a global phenomenon; in fact, US excess growth in 2010 and 2011 was slightly higher than average relative to other industrialized countries.

Place holder to copy figure label and caption
Figure.
Excess Health Spending Growth in the United States and Other Industrialized Countries

Periods when the US economy was in recession are shaded. Source: 2013 Organisation for Economic Co-operation and Development (OECD) health data.5 US health spending data are from National Health Expenditure Accounts, adjusted to meet OECD definitions (Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group).aThe OECD median includes only the 23 OECD countries with ≥25 years of data between 1980 and 2011.bIn 2012, data were available only for 12 OECD countries, including the United States.

Graphic Jump Location

What does this observation imply about the US slowdown? It suggests that the factors that stimulated the slowdown in the United States also affected other industrialized countries. The most obvious possible explanation is the 2007-2009 financial crisis. According to this scenario, the recession placed tremendous financial pressure on all affected countries to constrain growth of their health systems. But there are other possible explanations. A slowdown in the introduction of expensive new technologies could have affected spending growth in all OECD countries because such technologies tend to spread across national boundaries. However, given that the United States generally adopts new health technologies faster than elsewhere,7 if availability of new technologies were the key factor in the slowdown, the tight international correlation in excess health care spending growth that is observed would not be expected.

Correlation does not establish causality. Other unmeasured factors besides rates of economic growth and technology introduction may be affecting health spending similarly in the United States and abroad. Furthermore, even if the global health spending slowdown was significantly influenced by prevailing economic conditions, this does not imply that the recession’s health system effects have been the same in each country. The US system has several unique characteristics, including far higher levels of health care spending; a largely private, market-based insurance system for most nonelderly adults; and tens of millions of uninsured and underinsured citizens. As a result, the recession for many in the United States translated directly into greater exposure to the cost of care through increased coinsurance and deductibles and the loss of health insurance coverage as workers were laid off or companies stopped offering coverage.8 This was generally not true in other wealthy countries, where health insurance coverage is universal and not tied to employment. These nations tended to restrain health care spending through global health care budgets, price controls for health care services and goods, and limiting salary growth for publicly employed health care professionals. Such tools allow the public sector to rein in spending without shifting costs to patients.

The close relationship between health spending and economic growth may not persist in the future—the past is not always a prologue. It is possible that the effects of the recession led to lasting changes in the United States or other health care systems. It is also possible that the reforms recently introduced by the Affordable Care Act and private payers may temper the cost increases that would otherwise have been expected as the US economy continues to recover.

Nevertheless, a continued global slowdown in the growth of health care spending seems unlikely, as it would require a simultaneous disruption of the historic link between gross domestic product and health spending in the majority of industrialized countries.

What is more, there is some evidence that health spending in the United States increased in recent months.9 Should this occur and health spending resume its historic patterns, the United States will face formidable health care challenges that will place increasing pressure on stakeholders to institute substantial changes in the organization and financing of care.

ARTICLE INFORMATION

Corresponding Author: David Squires, MA, the Commonwealth Fund, 1 E 75th St, New York, NY 10021 (ds@cmwf.org).

Published Online: June 26, 2014. doi:10.1001/jama.2014.7221.

Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported.

Additional Contributions: I thank David Blumenthal, MD, MPP, and Cathy Schoen, MS, from the Commonwealth Fund, for their feedback and suggestions during the preparation of an earlier version of the manuscript.

REFERENCES

Martin  AB, Hartman  M, Whittle  L, Catlin  A; National Health Expenditure Accounts Team.  National health spending in 2012: rate of health spending growth remained low for the fourth consecutive year. Health Aff (Millwood). 2014;33(1):67-77.
PubMed   |  Link to Article
Blumenthal  D, Stremikis  K, Cutler  D.  Health care spending—a giant slain or sleeping? N Engl J Med. 2013;369(26):2551-2557.
PubMed   |  Link to Article
Reinhardt  UE, Hussey  PS, Anderson  GF.  US health care spending in an international context. Health Aff (Millwood). 2004;23(3):10-25.
PubMed   |  Link to Article
Smith  S, Newhouse  JP, Freeland  MS.  Income, insurance, and technology: why does health spending outpace economic growth? Health Aff (Millwood). 2009;28(5):1276-1284.
PubMed   |  Link to Article
Organisation for Economic Co-operation and Development. OECD Health Data 2013: Statistics and Indicators. Paris, France: Organisation for Economic Co-operation and Development; 2013.
Assessing the Effects of the Economy on the Recent Slowdown in Health Spending. Washington, DC: Henry J. Kaiser Family Foundation; April 2013.
Kanavos  P, Ferrario  A, Vandoros  S, Anderson  GF.  Higher US branded drug prices and spending compared to other countries may stem partly from quick uptake of new drugs. Health Aff (Millwood). 2013;32(4):753-761.
PubMed   |  Link to Article
Chandra  A, Holmes  J, Skinner  J. Is This Time Different? The Slowdown in Health Care Spending. Cambridge, MA: National Bureau of Economics Research; December 2013. Working paper 19700.
Health Spending Growth in March Continues Recent Acceleration. Washington, DC: Altarum Institute; May 2014. Spending brief 14-05.

Figures

Place holder to copy figure label and caption
Figure.
Excess Health Spending Growth in the United States and Other Industrialized Countries

Periods when the US economy was in recession are shaded. Source: 2013 Organisation for Economic Co-operation and Development (OECD) health data.5 US health spending data are from National Health Expenditure Accounts, adjusted to meet OECD definitions (Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group).aThe OECD median includes only the 23 OECD countries with ≥25 years of data between 1980 and 2011.bIn 2012, data were available only for 12 OECD countries, including the United States.

Graphic Jump Location

Tables

References

Martin  AB, Hartman  M, Whittle  L, Catlin  A; National Health Expenditure Accounts Team.  National health spending in 2012: rate of health spending growth remained low for the fourth consecutive year. Health Aff (Millwood). 2014;33(1):67-77.
PubMed   |  Link to Article
Blumenthal  D, Stremikis  K, Cutler  D.  Health care spending—a giant slain or sleeping? N Engl J Med. 2013;369(26):2551-2557.
PubMed   |  Link to Article
Reinhardt  UE, Hussey  PS, Anderson  GF.  US health care spending in an international context. Health Aff (Millwood). 2004;23(3):10-25.
PubMed   |  Link to Article
Smith  S, Newhouse  JP, Freeland  MS.  Income, insurance, and technology: why does health spending outpace economic growth? Health Aff (Millwood). 2009;28(5):1276-1284.
PubMed   |  Link to Article
Organisation for Economic Co-operation and Development. OECD Health Data 2013: Statistics and Indicators. Paris, France: Organisation for Economic Co-operation and Development; 2013.
Assessing the Effects of the Economy on the Recent Slowdown in Health Spending. Washington, DC: Henry J. Kaiser Family Foundation; April 2013.
Kanavos  P, Ferrario  A, Vandoros  S, Anderson  GF.  Higher US branded drug prices and spending compared to other countries may stem partly from quick uptake of new drugs. Health Aff (Millwood). 2013;32(4):753-761.
PubMed   |  Link to Article
Chandra  A, Holmes  J, Skinner  J. Is This Time Different? The Slowdown in Health Care Spending. Cambridge, MA: National Bureau of Economics Research; December 2013. Working paper 19700.
Health Spending Growth in March Continues Recent Acceleration. Washington, DC: Altarum Institute; May 2014. Spending brief 14-05.

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