That has led to a heated debate among healthcare economists about whether the slowdown would continue and help alleviate the fiscal strain of healthcare in coming years.
Healthcare is slated to remain a large and growing share of the overall economy. Health spending will total $3.1 trillion next year and increase to $5 trillion by 2022, projections show, rising from its current 17.9% of gross domestic product to 19.9% over the next decade.
Economists responded to the latest federal projections last week with some uncertainty and questions. “We should have more clues in the next couple of years,” David Cutler, an economist at Harvard University, said in an e-mail.
Cutler's own research, published in May in Health Affairs, attributed some of the slowdown to the economy, but said more than half of the soft health spending growth could not be explained by the recession. More efficient healthcare insurance with higher deductibles or co-insurance for patients and fewer brand-name drugs may have accounted for 55% of the flagging growth, according to Cutler's paper. The economy accounted for 37%. The rest was a result of Medicare cuts and a drop in privately insured patients.
Federal projections released last week also gave credit for some of the health spending growth slowdown to use of generic drugs and greater cost-sharing for patients.
Numerous blockbuster drugs—defined as drugs that sell more than $1 billion a year—have lost patent protection since 2011 and contributed to revised federal projections for health spending in 2014. Moreover, demand for costly specialty drugs was less than expected, said Sean Keehan, an economist with the CMS Office of the Actuary, which published the projections online in the journal Health Affairs.
The result, according to the actuaries' study, was an unprecedented decline in drug spending of 0.8% in 2012 and a sluggish increase of only 0.6% in 2013. But with millions more people gaining coverage and fewer blockbusters coming off patent protection, drug spending is expected to climb 5.2% next year, according to the projections.
Health plans with higher deductibles or co-insurance contributed to weaker demand for medical care, federal officials wrote, and will continue to stifle household spending.
The CMS also revised 2014 estimates for the insurance expansion to reflect that some states will take advantage of a 2012 U.S. Supreme Court ruling and won't increase eligibility for Medicaid made possible by the Affordable Care Act. Medicaid spending will jump 12.2% next year with an influx of 8.7 million enrollees. Most of that increase will be picked up by the federal government. Next year, federal health spending will increase 13.8%.
Those newly insured under Medicaid will be younger and without disabilities, so Medicaid spending per person will drop by 2.8%, federal officials said. Also, the newly insured overall will likely be younger and healthier and will likely need less hospital care, but will require more prescriptions and physician visits.