Lingering recession, early ACA provisions, expiring patents slowed health spending growth

In recent years, slower growth in health care spending has been somewhat attributed to a check on growth in costs for treating diseases. The Kaiser Family Foundation and the United States Bureau of Economic Analysis reviewed health spending in the last several years, finding that the recession, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), and expiring drug patents worked together to slow health spending in 2011 and 2012.

Disease spending

The brief notes that information on disease spending has only been analyzed in recent years, which does not allow for much comparison over time. Health spending growth overall during 2011 and 2012 was around 4 percent per capita, comparable with the “slowdown period” (2005 to 2010), but cost per case, known as the disease-based price index, grew even slower: 2.3 percent in 2011, and 2.1 percent in 2012.

Cost growth varied by disease. During the slowdown period and in recent years, cost per capita remained about the same for routine care. However, cost for nervous system treatment dropped from 6.54 percent to 4.43 percent, while cost to treat neoplasms (cancer) went from 4.69 percent to 1.90 percent.

Factors

Evidence shows that while there were some immediate effects on health care spending due to the recession (2008 to 2010), there was also a lagged effect in which health care spending in 2011 and 2012 grew in a similar level to the recession. Some of this can be attributed to drops in employment resulting in shifts away from private insurance toward enrollment in Medicaid or uninsurance, which usually results in lowered use of health care services.

The ACA also impacted health spending in 2011 and 2012, even though some key provisions were not yet implemented. For example, Medicare reduced provider reimbursement rates and the ACA expanded coverage of preventive care services, many of which are classified as routine care. This caused a sharp increase in use of preventive services.

The brief also analyzed the “patent cliff” observed between 2010 and 2012. Many brand-name drugs saw their patents expire during this period, allowing patients to switch to affordable generic versions. This correlated with a drop in cost per case. The major drugs Effexor XR® and Adderall® lost patent exclusivity in 2010 and 2009, respectively. The costs for treating mood disorders fell during this period while more people were being treated, and the costs for treating attention deficient and hyperactivity disorders grew more slowly than in previous years, while more people were seeking treatment.