Sluggish Economy, Not Health Reform, Drove Spending Slowdown

The economic downturn can take the credit for about 70% of the recent decline in health care spending growth from 2009 to 2011, according to a study published in the August issue of Health Affairs. As the economy recovers, health spending is likely to increase at a faster pace. “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,” said study co-author David Dranove of the Kellogg School of Management at Northwestern University.

“There has been disagreement, over the years, as to whether health spending is recession proof. This study shows it’s not. The analysis, which focuses on privately insured people, highlights that the slowdown in health spending was not only caused by people who lost their jobs and employer-provided health insurance. Even people who retained insurance during the downturn reigned in their health spending. This demonstrates the broad effects of a recession on health spending,” said Co-author Craig Garthwaite, an assistant professor at the Kellogg School of Management.

Health spending growth slowed 2.6% from 2009 to 2011. The authors predict that health-spending growth would have been 1.8% higher if the economy had not faltered in 2008.  Insured people living in the hardest hit areas experienced the smallest increases in health spending. Thus, they concluded that 70% of the decline in health care spending growth was the result of the stagnant economy.  For more information, visit http://www.healthcostinstitute.org/ -and-future-research-projects@healthcostinst.

Last Updated 10/20/2021

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