Reform Update: Great Recession spawns Great Debate over health spending

Economists and policymakers are puzzling over how big an impact the Great Recession and its aftermath are having on reducing healthcare spending, whether the economic upswing will unleash pent-up demand for care, and whether the current lower spending is actually good for Americans' health.

New research shows that household health spending declined even among those with private insurance and medical needs. Out-of-pocket costs for children with special medical needs declined between 2007, when the recession began, and 2009, the year the recession officially ended, a newly published study in Health Affairs says.

The results underscore the growing financial strain faced by households from medical bills during the recession—and even before—as real wages stalled or declined and health plans required patients to pay more of the cost of care through larger deductibles and copayments, health policy experts said.

People have “less income to spend on healthcare and at the same time are being more exposed to the cost of healthcare,” said Sara Collins, vice president for affordable health insurance with the Commonwealth Fund.

New insurance provisions of the Patient Protection and Affordable Care Act likely will reduce household financial burden among those with the fewest resources, she said, including subsidies for premiums and cost-sharing bills for low-income patients.

Whether that out-of-pocket exposure prompted more patients to forgo unnecessary treatment and bargain hunt—swapping a generic for a more expensive blockbuster or skip out entirely on necessary medical care—remains unclear. But households did scale back spending in response to the downturn, said Peter Cunningham, a senior fellow with the Center for Studying Health System Change.

The average cost of care for children with medical needs—those who need healthcare for physical, developmental, behavioral and emotional conditions—dropped nearly one-fifth, to $626 in 2009. The recession officially ended in June of that year. That's compared with $774, on average, two years earlier.

Health spending also declined sharply for all parents, even in households where children do not live with conditions that drive up medical costs, the study found. Children without medical needs, however, saw continued gradual growth in health spending through the recession. The study's authors noted that children with special medical needs had “much higher out-of-pocket spending to begin with.”

Parents possibly delayed care to offset the out-of-pocket costs for their children, said Pinar Karaca-Mandic, an author of the study and an assistant professor of health policy at the University of Minnesota.

Fewer prescription drugs largely drove declines in out-of-pocket costs, as did less dental care among adults.

The uninsured struggled most with medical debt in 2011, newly released data from the Centers for Disease Control and Prevention show. The Affordable Care Act seeks to significantly expand insurance coverage starting next year with greater enrollment in Medicaid, the safety net public insurance; subsides for private insurance for low-income households; and tax penalties for those who can afford insurance but refuse to buy it. More than one-third (36.3%) of uninsured households struggled with medical debt. Among the insured, roughly 10% reported medical debt, as did one-quarter of those with public insurance.

Investments to boost primary and preventive care appear to be a popular strategy among hospitals and medical groups willing to test accountable care, a payment model that pairs financial incentives with performance on quality and saving targets. But research published last week suggests high deductibles could stymie efforts to promote wellness and disease management efforts that occur outside the hospital. Workers at a Midwestern manufacturing company that offered high deductible plans with health savings accounts went to doctors less often and did not fill as many prescriptions, the study found.

Follow Melanie Evans on Twitter: @MHmevans