Recession, not Affordable Care Act, slows health spending, study concludes

| Tuesday, Aug. 5, 2014, 12:01 a.m.

Spending on health care in the United States grew at a slower pace in recent years because of the economic recession and not because of the Affordable Care Act, an academic study published on Monday concluded.

Some politicians and supporters of President Obama's health care overhaul have contended that the 2010 law was responsible for slowing the nation's spending on drugs, doctor visits and hospital stays.

But according to the study, which appears in the August issue of the peer-reviewed journal Health Affairs, 70 percent of the slower growth of health care spending observed from 2009 to 2011 can be explained by the recession and its lingering effects.

“While the Affordable Care Act may yet prove to be a huge force for reducing health care spending, it is premature ... to make that claim,” said David Dranove, a professor of health industry management at Northwestern University in Evanston, Ill., and co-author of the study.

Dranove, along with two colleagues at Northwestern, Craig Garthwaite and Christopher Ody, compared cities that been hit hard by the recession with those that had not, which allowed the researchers to model the effect of the economic downturn on health care spending.

They found that the growth rate for health care spending was 2.6 percentage points lower in the 30 months after the Great Recession ended in June 2009 than in the 30 months that covered the period leading up to and during economic downturn. The comparison of cities showed that health spending would have been 1.8 percentage points higher if there had not been a recession. The difference translated to a decline of 70 percent attributed to the recession, the study found.

“Our estimates show that most of the recent slowdown in health spending growth, at least among the working population, can be attributed to the economic slowdown and not to other factors such as early responses to the ACA,” the researchers write in the study.

Dranove said the study is limited to the population of Americans who receive health insurance coverage through work because the data used in the study came from insurance claims for employer-sponsored health plans from three of the nation's largest insurers, Aetna, Humana and United Healthcare. More than half of Americans get health coverage through an employer, experts have said.

While people often lose insurance during recessions because of layoffs, even people who hold onto jobs and health coverage will cut down on medical expenses, Dranove said. This has been particularly true in the last several years as employers shifted higher health costs onto their workers through bigger deductibles and premium payments, he said.

The researchers argue that as the economy continues to improve, the expansion of health care spending is likely to again outpace overall economic growth.

Health care spending increased dramatically between 2000 and 2009, but has fallen slightly in the last several years, according to data from the Centers for Medicare & Medicaid Services, an agency within the Department of Health and Human Services.

Health care as a share of gross domestic product increased from 13.4 percent in 2000 to 17.4 percent in 2009, CMS data show. By 2012, health care's share of the national economy had declined to 17.2 percent.

The recession officially ended in June 2009, but its effects were felt for many years. The unemployment rate, for example, finally dipped below 7 percent in December for the first time since November 2008, according to the Labor Department. It was 6.2 percent last month.

In the last 18 months, health care spending has been steadily increasing again, according to data from the Bureau of Economic Analysis, a government agency that tracks economic growth. In the first quarter of 2013, Americans spent $1.89 trillion on health care. In the second quarter this year, that figure had risen to $1.96 trillion, a 4 percent increase.

Despite the increase more recently, Dranove said the law still may have an impact on health spending.

“We're not writing off the Affordable Care Act. It was probably too early to expect it do something,” Dranove said. “Just because spending has gone up a bit doesn't mean that (the law) failed. ... It's fighting against the larger economic recovery.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or

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