About 70 percent of the recent decline in health-care spending growth from 2009-2011 was due to the economic downturn, and not because of other factors such as health-care sector responses to the Affordable Care Act. That’s according to a news release from the Health Care Cost Institute, citing a new study published in the August […]
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About 70 percent of the recent decline in health-care spending growth from 2009-2011 was due to the economic downturn, and not because of other factors such as health-care sector responses to the Affordable Care Act. That’s according to a news release from the Health Care Cost Institute, citing a new study published in the August issue of Health Affairs.
The Health Care Cost Institute says it was launched in 2011 to “promote independent, nonpartisan research and analysis on the causes of the rise in U.S. health spending.”
As the economy recovers, spending on health care is likely to increase at a faster pace, conclude the study authors, David Dranove, Craig Garthwaite, and Christopher Ody of the Kellogg School of Management at Northwestern University.
“The source of the slowdown in health care spending growth, and whether this slowdown will continue, has been much debated,” Dranove, a professor at the Kellogg School of Management at Northwestern University, said in the news release. “Our analysis shows that the slowdown was mostly due to the sluggish economy, not to structural change in the health care sector. The Affordable Care Act may ultimately succeed at reducing costs, but it hasn’t done so yet.”
The Northwestern researchers are among the first to pinpoint the effect of the economic slowdown on health-care spending for the privately insured, working-age population, the Health Care Cost Institute news release stated. The academics examined private insurance-claims data covering 2007-2011 from the Health Care Cost Institute (HCCI), which represents the health-care spending of nearly 47 million people with employer-sponsored insurance in all 50 states.
From 2009-2011, health-spending growth for this population slowed by 2.6 percentage points from the previous two years. By calculating the overall decline in employment during this period, the study authors predict that health-spending growth would have been 1.8 percentage points higher if the economy had not faltered in 2008. Thus, they concluded that 70 percent of the decline in health-care spending growth resulted from the stagnant economy, the HCCI release said.
“There has been disagreement over the years as to whether health spending is recession proof. This study shows it’s not,” said Garthwaite, an assistant professor at the Kellogg School of Management.
The analysis, which focuses on privately insured individuals, highlights that the slowdown in health spending was not caused solely by individuals who lost their jobs and employer-provided health insurance, the news release stated.
“Even individuals who retained insurance during the downturn reined in their health spending. This demonstrates the broad effects of a recession on health spending,” said Garthwaite.
The researchers compared health spending in areas of the country affected by the economic downturn with parts of the economy that were largely unaffected. Insured people living in the hardest-hit areas faced the smallest increases in health spending.
For example, from 2008-2009, Las Vegas, Nev. — a particularly hard-hit region — experienced a 5.6 percentage point decline in the fraction of residents working, the release noted. From 2007 to 2011, health spending in Las Vegas increased 5.4 percent. In contrast, Trenton, N.J. experienced a 1.6 percentage-point decline in the fraction of residents working and a 29 percent increase in health spending.
The Kellogg School of Management at Northwestern University is an academic partner of HCCI.
HCCI said it currently holds one of the largest, private, health-insurance claims databases available for public reporting and academic-research purposes.
“The majority of Americans have private insurance, so understanding their health spending patterns is critical to understanding what influences national health care expenditures,” HCCI Executive Director David Newman said in the release.
The full study by the Northwestern researchers can be found and accessed at: http://content.healthaffairs.org/content/33/8/1399.abstract
