Slower, but not slow enough

Oh! We should be so relieved. Healthcare spending growth has slowed to a mere eight percent. Our last post suggests not.

The news from the Center for Studying Health Systems Change is that healthcare spending growth has slowed a bit. The report is published in Health Affairs.

Our prior post was a jumping off point to a larger discussion the central point of health economics in the US today. So long as growth in healthcare spending exceeds the rate of growth in the rest of the economy, which pays for healthcare, the day of reckoning is inevitable.

June 21, 2005
Health Affairs, Web Exclusive (June 21, 2005)
Bradley C. Strunk, Paul B. Ginsburg, John P. Cookson

Health care spending increased 8.2 percent in 2004. This was virtually unchanged from 2003, which suggests that health care cost trends have stabilized. Hospital spending grew 10.1 percent in 2004, also virtually unchanged from 2003, reflecting a small increase in the hospital utilization trend and a small decline in hospital price inflation. Meanwhile, growth in prescription drug spending continued to fall as a result of slower growth in prices. Growth in health insurance premiums slowed again in 2005, likely reflecting earlier years’ slowing in cost trends and signaling that a turn in the insurance underwriting cycle might be under way.

So why isn't the slowdown in healthcare cost growth satisfying? Because healthcare cost growth, as it has almost every year in the past decade (there were two early exceptions before the managed care backlash), and essentially for decades has exceeded growth in the rest of the economy or GDP overall and that only takes us closer to trouble. Most immediately, as we discussed below, it forces people out of the coverage system. The more recent source data are here.

So headlines and links (here and here too) that even modestly celebrate this slowing of healthcare cost growth largely miss the point. Unless the slowdown is to a growth level less than the economic rate of growth, then we have not reversed our race to the day of reckoning. We might have slowed a bit, but not reversed.

Moreover, these trends have a direct bearing on our discussions of universal coverage and why single-payer is a less than satisfactory response. That will be the subject of my next post.