Medicare's Bending Cost Curve. July 28, 2014. I. National Health Spending


There is considerable uncertainty regarding the relative contribution of various factors to the slowdown in national healthcare spending. Factors likely to have affected spending growth in recent years include:

  • Slower growth in the demand for health care services due to the recession and modest recovery
  • Changes in care delivery related to pre-Affordable Care Act (ACA) and ACA related payment changes and value-based purchasing efforts
  • The recent high rates of generic penetration in the prescription drug market accompanied by lower rates of use of new health care technology; and
  • Changes in the benefit design of employer sponsored insurance.

How much of the slowdown in national health spending is due to the recession and its subsequent slow recovery has been a matter of considerable discussion. Recent studies applying different methods have found a substantial range in estimates.9 However, a CBO analysis suggests that, whatever role the recession may have played in driving trends in private health care spending, the recession appears to have played a small role in driving trends in Medicare spending. Their analysis estimated the effect of changes in wealth and income due to the recession on Medicare beneficiaries’ use of health care services and found that the recession had little effect on demand for health care services by Medicare beneficiaries.10 As evidenced by Figure 1 above, the slowdown in per capita spending growth began prior to the recession, suggesting that other factors have been at play. In addition, the CBO and other analysts find that reductions in utilization rather than payment played a significant role suggesting that more fundamental changes in the health care delivery system may account for these trends.11

9Assessing the Effects of the Economy on the Recent Slowdown in Health Spending (Washington, D.C.: The Henry J. Kaiser Family Foundation, 22 April 2013) < [accessed 8 July 2013]; David M. Cutler and Nikhil R. Sahni, ‘If Slow Rate Of Health Care Spending Growth Persists, Projections May Be Off By $770 Billion’, Health Affairs, 32 (2013), 841–50.

10 Michael Levine and Melinda Buntin, Why Has Growth in Spending for Fee-for-Service Medicare Slowed? (Washington, D.C.: Congressional Budget Office, August 2013).

11 Cutler and Sahni.

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