What Drove the Recent Slowdown in Health Spending Growth and Can It Continue?

A review of trends in health spending growth over the last decade show that growth began to slow well before the most recent recession.

According to the Centers for Medicare and Medicaid Services, health spending grew at a record low rate of 3.9 percent in 2011. While the slow rate of growth was attributed to the recession in 2009 and to a sluggish recovery in 2010, the most recent estimates have many analysts wondering if the slowdown in health spending growth is here to stay. In fact, the typically cautious Congressional Budget Office lowered its Medicare and Medicaid forecasts in February 2013 to reflect the latest spending trends.

In this report, the authors discuss commonly cited drivers of the slowdown in spending growth—some argue that cyclical economic factors have been the primary cause, while others point to more fundamental structural changes to the health system.

Key Findings

  • Health spending grew at 3.9 percent in both 2009 and 2010, but economic growth was negative in 2009 (-2.2%) as a result of the recession and had recovered to 3.8 percent in 2010.

  • The slowdown in health spending over the last decade was likely driven by a variety of changes occurring in response to a decade of declines in real incomes and the shifting distribution of health insurance coverage.

The implications for future spending growth will depend on whether the changes that slowed health spending growth over the last decade will be maintained or extended as the economy recovers and the Affordable Care Act expands health insurance coverage.