Working Paper: NBER ID: w19700
Authors: Amitabh Chandra; Jonathan Holmes; Jonathan Skinner
Abstract: Why have health care costs moderated in the last decade? Some have suggested the Great Recession alone was the cause, but health expenditure growth in the depths of the recession was nearly identical to growth prior to the recession. Nor can the Affordable Care Act (ACA) can take credit, since the slowdown began prior to its implementation. Instead, we identify three primary causes of the slowdown: the rise in high-deductible insurance plans, state-level efforts to control Medicaid costs, and a general slowdown in the diffusion of new technology, particularly in the Medicare population. A more difficult question is: Will this slowdown continue? Here we are more pessimistic, and not entirely because a similar (and temporary) slowdown occurred in the early 1990s. The primary determinant of long-term growth is the continued development of expensive technology, and there is little evidence of a permanent slowdown in the technology pipeline. Proton beam accelerators are on target to double between 2010 and 2014, while the market for heart-assist devices (costing more than $300,000) is projected to grow rapidly. Accountable care organizations (ACOs) and emboldened insurance companies may yet stifle health care cost growth, but our best estimate over the next two decades is that health care costs will grow at GDP plus 1.2 percent; lower than previous estimates but still on track to cause serious fiscal pain for taxpayers and workers who bear the costs of higher premiums.
Keywords: No keywords provided
JEL Codes: H50; I1; I11; I13; I28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rise of high-deductible insurance plans (G52) | increased out-of-pocket costs for patients (I11) |
| increased out-of-pocket costs for patients (I11) | reduced physician visits, particularly among financially distressed households (G52) |
| cuts in Medicaid benefits and reimbursement rates (I18) | nearly flat per capita real spending for Medicaid enrollees (H51) |
| nearly flat per capita real spending for Medicaid enrollees (H51) | limited access to care and reduced overall healthcare spending growth (H51) |
| slowdown in the diffusion of new medical technologies (O33) | moderation in healthcare spending growth (I18) |
| moderation in Medicare spending (I18) | not attributed to improved health among enrollees or financial stress (I19) |
| changes in technology adoption and utilization (O33) | moderation in Medicare spending (I18) |