Economist: Slow growth in healthcare spending is likely here to stay

Rising healthcare costs have haunted both the sector and individual Americans for decades, but what if the recent slowdown in increases is actually permanent?

That's the argument of Temple University economics professor Tom E. Getzen, who also serves as executive director of the International Health Economics Association.

Getzen is highly skeptical that the annual medical cost inflation trends from a decade or so ago would be replicated anytime soon, according to a recent post on the Altarum Institute's blog.

"It is unlikely that that the rate of excess growth will again exceed 3 percent for any extended span, although a rebound from the great recession may temporarily drive the numbers higher for a year or two," Getzen wrote. Instead, he projected that a "reasonable range for future healthcare cost growth might be 0.5 percent to 1.5 percent a year moving forward." Some of Getzen's charts were annotated by Healthcare Finance News.

The primary reason for the slowdown is clear to Getzen, and in today's context, fairly grim: Prior growth in healthcare spending was fueled in part by healthy growth in wages. That was particularly the case during the 1950s, which was the biggest era of economic expansion in the history of the United States, and was also accompanied by a rise in the lifespan due to improving medical technology.

In the century before 1950, the growth was relatively slow, according to Getzen. The cost growth spike in the 1950s began to subside starting around 1980 after the effects of Medicare and Medicaid were fully absorbed, and really began to drop with the onset of the Great Recession.

However, costs passed down to consumers are exacerbated by insurers, which have tended to raise their prices above the actual increases in medical spending, FierceHealthPayer has reported.

Whatever spending increases occur in the future will likely be focused on longevity measures rather than all-around healthcare services, according to Getzen.

"Problematically, the bulk of spending will be increasingly concentrated on those aged 65 or older, even though the relative rate of medical cost increases for the elderly, which was much higher than average from 1955 to 1985, is now much lower and likely to be increasingly constrained," Getzen wrote.

To learn more:
- read the blog entry
- check out Getzen's charts

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