After Decline in U.S. Health Expenditure Growth, OECD Sees Risk of Spending Uptick in Recovery

 

June 30, 2014 – Gains made towards slowing health expenditure growth in the United States in recent years could be negated by price increases associated with the continuing economic recovery unless more efforts are made to contain spending, says a new OECD paper published in The Lancet.

 

The report finds that growth in per-capita expenditure declined sharply in the U.S. during the period 2000-11, after adjusting for inflation. Price dynamics were largely responsible for this spending slowdown, which began prior to the financial crisis. As the economic recovery continues, however, additional efforts will be needed to contain growth in health sector prices— the main driver of health-care expenditure in the U.S.

 

“The risk that a future sustained economic recovery, and the probable general price increases that would come with it, might offset the gains made in recent years, is real and should be anticipated,” said Franco Sassi of the OECD’s health division.

 

The paper analyses health care expenditure and policy in the US and five other high-spending countries (Canada, France, Germany, the Netherlands and Switzerland) over the period 2000-11.

 

Suggested measures to tackle higher expenditure growth include further tightening and extending Medicare and Medicaid price controls on plans and providers, particularly for pharmaceutical products and physician fees. While the report acknowledges that bolder measures in the hospital sector would require major changes in the U.S. health-care market, such efforts could include negotiating all-payer fees at the state level, global budgets and reference prices.

 

“Recent years  have seen efforts made to contain further growth in health care expenditure in the U.S. […] however, this progress is no reason for complacency,” said Sassi.

 

In an analysis of the “staggering levels of expenditure” in the United States, the report’s authors find that the elevated figures cannot be fully explained by higher wealth levels, the age structure of the U.S. population, nor the larger prevalence of risk factors such as obesity. Instead, high health sector prices due to intense use of health-related technologies, low productivity, decentralized price negotiations, fragmentation in the insurance market, and a high level of provider concentration were listed as the main explanations for high spending. 

Data in the report shows that U.S. health spending grew more than twice as fast as in comparator countries in the early 2000s, but growth rates declined rapidly—and fell below those of comparator countries—after 2007. Preliminary analyses of newly released 2012 data show that the U.S. and comparator countries experienced a small rebound in health care spending growth, with the U.S. spending growing less than that of comparator countries. In terms of share of GDP, health spending in the United States rose from 13% in 2000 to 16.9% of GDP in 2009. However, from 2009 to 2011 health spending grew by only 0.1%, to 17% of GDP.

 

For full Series paper, see: http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)60571-7/abstract

 

For further information on The Lancet’s “Health of the Americans” series, please contact Daisy Barton (daisy.Barton@lancet.com)

 

For information or interviews about “Health-care expenditure and health policy in the USA versus other high-spending OECD countries”, journalists can contact Luca Lorenzoni (luca.lorenzoni@oecd.org),  Franco Sassi (Franco.Sassi@oecd.org) or Annalisa Belloni (Annalisa.Belloni@oecd.org) in the OECD’s Health Division. Alternatively, North American media may contact Miguel Gorman (Miguel.rodriguez-gorman@oecd.org) at the OECD Washington Media Office.

 

More information on OECD’s work on health in the United States can be found at: http://www.oecd.org/health/bycountry/unitedstates/