Health Spending Growth Slows. But Is it More Efficient?

Annie Lowrey talks to some smart people and gets some good news:

One sign that the slowdown might be lasting is that it seems to have started before the recession took hold and is continuing even as the economy picks up. “The more we look at the data, the more it seems to me that the cost curve did bend before the recession,” said Charles Roehrig of the Altarum Institute, a health care research organization. Additionally, health spending did not seem to decline or slow down more in states that were hit harder by the economic downturn, and it has flattened for Medicare patients, even though they tend to be sheltered from the effects of economic fluctuations.

“If you go out and talk to doctors and hospital executives, they believe their world is changing,” said Peter Orszag, a former budget director in the Obama administration and now a vice chairman at Citigroup. “Nothing in life is conclusive, but I think the case for this being at least partially structural is much stronger than the case for it being entirely cyclical.”

Later in the piece, Douglas Holtz-Eakin cautions us not to be too confident the slow down will continue. I agree.

What’s more interesting to me is not whether health spending growth is slowing, but whether health spending is becoming more efficient. That is, I want to know if growth for overused, low-value care is moderating while growth in high-value, underused care is at least holding steady. Are we trimming fat or muscle? Notice that health spending could accelerate and still be efficient. There are areas in which we should spend more. It all depends on what that spending is buying. In this respect, our obsessive focus on reducing or bending the curve of the health care budget is a bit misguided. After all, we could do that quite easily and be far worse for it.

[Cross-posted at The Incidental Economist]

Austin Frakt

Austin Frakt is a health economist and an assistant professor at Boston University's School of Medicine and School of Public Health. He blogs at The Incidental Economist.