The Economy Is the Major Driver Health Care Spending

National health spending grew 3.9% each year from 2009 to 2011. That’s s the lowest rate of growth since the government began keeping track in 1960. A bad economy is credited with much of the decline in health spending, according to researchers at the Kaiser Family Foundation and the Altarum Institute’s Center for Sustainable Health Spending. Structural changes in the health system may play a modest role as well. In recent years, spending growth has fallen to levels similar to what was seen in the mid to late 1990s when managed care spread rapidly. Changes in health care delivery and rising cost sharing with insurance plans could be discouraging the use of health services.

Health spending is expected to increase the economy recovers, though growth rates are not likely to return to double-digit levels. Health spending increases will also depend on whether excess health costs remain at a relatively modest level or return to the historical norm. History suggests that previous efforts to control health care costs have only had a temporary effect, and there are initial signs that the recent slow down is beginning to wane.

Changes under the ACA could affect these trends significantly. Researchers expect a one-time spending bump by a couple of percentage points as the uninsured gain coverage and get better access to health services. Researchers also expect an economic recovery to lead to higher growth rates in health spending. They caution that the increase should not be attributed to the ACA simply because of the coincidental timing.

The bulk of the Medicare savings included in the ACA will lower the future growth in spending — primarily through smaller increases in payments to providers. Accountable care organizations (ACOs) and bundled provider payments may help keep costs down for public programs and private insurance. In addition, the ACA’s tax on high cost, Cadillac employer-sponsored health plans, which is scheduled to take effect in 2018, is expected to trim the cost of benefits and lead to lower health spending. For more information, visit

Last Updated 05/25/2022

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