December 1, 2011

Weak Economy Curbs U.S. Health Spending

by Julie Rovner

No, it’s not quite going down. But health care spending in 2010 rose at the second-slowest rate in the last half-century.

The Centers for Medicare and Medicaid Services reports that total health spending in the U.S. increased by 3.9 percent in 2010, just a notch above the slowest rate since the government started keeping track — 3.8 percent in 2009.

Overall, the U.S. spent $2.6 trillion on health care in 2010, or $8,402 per person. That’s 17.9 percent of the nation’s gross domestic product.

But despite claims from Republicans that the federal health overhaul, signed into law in March 2010, is already causing health spending to surge, these numbers don’t bear that out, says lead author Anne Martin.

“Although some provisions of the Affordable Care Act were in effect in 2010, their impact on health spending was minimal,” Martin told reporters on a conference call.

What, then, accounts for two straight years of historically slow growth in health spending? Mostly the poor economy.

“A substantial loss of private health insurance, and lower median household income, contributed to extraordinarily low growth in the use and intensity of health care goods and services in 2010 as individuals remained cautious about their spending,” Martin said.

Yet many voters seem to be under the impression that the health law is raising, not lowering, health care spending.

So what accounts for that?

“If I had to answer it truthfully, mostly the answer is politicians lie the blue from the sky to serve their purpose,” said Princeton health economist Uwe Reinhardt. “It would be hard to imagine how the Affordable Care Act could have driven up health spending in the last year, simply because it really doesn’t start until the year 2014.”

In fact, Reinhardt says that President Obama “could turn this on the Republicans and claim that his health care bill has controlled health care spending. That wouldn’t, in my view, be true, either. But he can do it. I hope he will, just to teach the other side a lesson.”

The White House is close to doing just that. In a blog post accompanying the study, Obama’s deputy chief of staff, Nancy-Ann DeParle, says the new numbers “show why the Affordable Care Act is so important. And we’re confident the law will continue to help hold down cost growth in the years ahead.”

And this slowdown in spending, of course, is relative; the 3.9 percent rise is more than double 2010’s overall inflation rate of 1.6 percent.

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