Good sign: Less spent on health

Recession not only factor, experts say. Growth rate is least in five decades, may help reduce deficit.

WASHINGTON — The growth of health-care spending has slowed substantially in the last few years, surprising experts and offering some fuel for optimism about the federal government’s longterm fiscal performance.

Much of the slowdown is because of the recession, and thus not unexpected, health experts say. But some of it seems to be due to changing behavior by consumers and providers of health care — meaning that the lower rates of growth might persist even as the economy picks up.

Because Medicare and Medicaid represent two of the largest contributors to the country’s long-term debts, slower growth in health-care costs could reduce the pressure for enormous spending cuts or tax increases.

In 2009 and 2010, total nationwide healthcare spending grew at less than 4 percent per year, the slowest annual pace in more than five decades, according to the latest numbers from the Centers for Medicaid and Medicare Services. After years of taking up a growing share of economic activity, health-care spending held steady in 2010, at 17.9 percent of the gross domestic product.

The growth rate mostly slowed as millions of Americans lost insurance coverage along with their jobs. Still, the slowdown was sharper than health economists expected, and a broad, bipartisan range of academics, hospital administrators and policy experts have started to wonder if what had seemed impossible might be happening — if doctors and patients have begun to change their behavior in ways that bend the socalled cost curve.

If so, it was happen- ing just as the new healthcare reform was coming into force and before the Supreme Court could weigh in on it or the voters could pronounce their own verdict at the polls.

“The tectonic plates might be beginning to shift,” said Karen Davis, president of the Commonwealth Fund, a nonprofit research group in New York. “It’s hard to believe everything that’s been tried over the last decade to slow spending wouldn’t be making a difference.”

Experts were surprised, for instance, at a drop in spending on some hospitalized seniors — people enrolled in Medicare, whose coverage the recession should not affect. They also noted that some of the states where health-care spending slowed most rapidly were those not hit particularly badly by the recession, suggesting that other factors were at play.

“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Barack Obama.

The implications of a bend in the cost curve would be enormous. Policymakers on both sides of the aisle see rising health-care costs as the central threat to household budgets and the country’s fiscal health. If the growth in Medicare were to come down to a rate of only 1 percentage point a year faster than the economy’s growth, the projected long-term deficit would fall by more than one-third.

Some experts caution there remains too little data to determine whether the current slowdown will become permanent, or whether it is a blip caused by the economy’s weakness.

“If there’s something else going on, we don’t know what it is yet,” said Gail Wilensky, a health economist who headed Medicare and Medicaid during the administration of President George H.W. Bush. “The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and three, you’d be foolhardy to say that we can understand it.”

Many experts — and the Medicare and Medicaid center itself — point to the explosion of highdeductible plans, where consumers have lower premiums but pay more out of pocket, as one main factor. That means thousands of consumers with an incentive to think twice about heading to the doctor.

A second factor is a dearth of expensive, nov- el drugs coming onto the market, experts said, as well as growing pressure to use generics. “There just aren’t as many blockbusters,” said Cutler, the Harvard economist.

Finally, and most im- portant, health economists point to a shift toward accountable care, in which providers are paid for the quality of care, not the quantity.

Many health-care experts said they believed that the shift toward publicizing medical-error rates and encouraging accountable care seemed to be paying dividends — and that providers were making changes in anticipation of Obama’s healthcare reform, which further emphasizes accountable care.

“In Massachusetts, we had a lot of political pressure to understand the growth in costs as unsustainable,” said Sandra Fenwick, chief operating officer of Children’s Hospital Boston, which has implemented more than 100 reforms, saving millions of dollars, in the past four years. “We had to figure out how we were going to be part of the solution, not part of the problem.”

Davis of the Commonwealth Fund said that “a lot of the big gains have come from keeping people out of the hospital and the emergency rooms.”

PHILIP SCOTT ANDREWS / THE NEW YORK TIMES Advertisements last year in Washington’s Union Station endorsed cuts in Medicare and Medicaid. If behaviors change and costs continue to slow, then the deficit might go down.