New York, NY, December 25, 2013—Regardless of the cause of the recent slowdown in U.S. health care cost growth, the U.S. needs to continue to control health spending, according to a new study by David Blumenthal, M.D., and Kristof Stremikis of The Commonwealth Fund and David Cutler, Ph.D., of Harvard University. The analysis, published today in the New England Journal of Medicine, also finds that a broad, bipartisan consensus about strategies that will be effective in controlling costs has emerged.
According to the authors’ calculations, last year health care spending rose only moderately for the third year in a row, increasing by 0.8 percent per person, slightly less than the rate of growth of gross domestic product (GDP) per capita. This trend marks a departure from the previous five decades, and may be fueled in part by payment reforms contained within the Affordable Care Act (ACA).
While analysts are divided on whether the new trend is a result of the recession or recent efforts to control spending, the authors of “Health Care Spending: A Giant Slain or Sleeping?” argue that, either way, the U.S. will need to “reengineer health services to make them more efficient—to go after the one-third of health spending that is estimated to be wasteful.” Blumenthal and his coauthors outline the areas of agreement among health policy experts about the actions that are needed to achieve this goal.
Understanding Slower Health Care Cost Growth
In the analysis, the authors review the potential causes of health care cost growth—such as the use of new and expensive medical technology, rising prices for medical services, and the prevalence of inefficient care—and summarize the debate over what has changed and triggered the slowdown. According to the article, potential factors contributing to lower costs include:
Consensus on Cost-Cutting Measures
Blumenthal and his co-authors recommend pursuing cost-cutting approaches that have been endorsed by a wide and bipartisan array of expert groups in order to avoid rationing of health care services and manage costs long-term, including:
“Even if spending growth stays low, our current level of expenditures is far higher than we need or can afford,” said coauthor and Commonwealth Fund president David Blumenthal. “A wide variety of studies suggests that as much as thirty percent of health spending in the U.S. is wasted.”
“Evidence seems to indicate that many of the Affordable Care Act’s payment reforms, which are moving the U.S. away from fee-for-service payment to value-based payment, are starting to bend the health care cost curve,” said coauthor David Cutler, the Otto Eckstein Professor of Applied Economics in the Department of Economics at Harvard University. “But further reforms are needed in areas such as simplifying health care administration and engaging consumers with better information.”
The authors conclude it’s too early to say if cost growth will remain slow but emphasize that, given the already high level of current spending and evidence of waste, the private and public sectors will continue to look for strategies to contain costs even if growth stays low.