• Chart: Health care spending growth factors

    Previously, I posted a chart from the JAMA study “The Anatomy of Health Care in the United States” and noted the recent, unprecedented slowdown in US health care spending. The chart below, from the same study, shows that the vast majority of the slowdown is due to lower use and intensity growth. Price growth remains robust by comparison.

    HC growth factors

    Imagine what we could do if we could bring price growth down even to the level of general inflation, which it exceeds.


    • Imagine if we could! How do you support bringing “price growth down” while also supporting the ACA? Do you just believe that the CMS analysis is wrong? Do you believe that we will be bringing 30-40 Million health care CONSUMERS into the market and will also be able to lower costs? Would love an explanation of this from you….

    • Without getting into the politics of the ACA do you think the ACA was constructed in a way that would reduce price growth while maintaining access and quality?

    • You know what the price elasticicity of demand is for most health care goods and services. People by and large do what they are told without questioning it or shopping around. I remember you yourself lamenting behaving in this way at some point in your past. You are a health economist. What chance do the rest of us have?

      To date providers have no reason to curb price growth and, with rare exception, no one is willing to do anything about it.

    • It looks like it is mostly about the prices but use and intensity do feed into price in that they increase demand. So the question is, how do we reduce price growth without resorting to price controls. I think regulatory reform might help but that is mostly a state matter and few people are interested enough in state politics to wrestle state government power away from the providers.

    • -Very tough to look at a complex category like “price growth” and have any idea what’s actually driving “price growth.” Is it driven primarily by higher labor costs, energy costs, etc or is it being driven by the substitution of more expensive drugs, tests, and devices in the place of older alternatives. Even you can determine that it’s the introduction of new versions that’s driving the cost, the data is useless unless it takes into account quality differentials between the old and the new.

      Is an artificial knee that costs twice as much but reduces post-operative pain and complications by 25%$, lasts twice as long, and improves mobility that kind of “cost growth” that we should be making an effort to combat? Ditto for heart valves, pacemakers, etc, etc, etc, etc, etc.

    • I’d argue that price transparency would do a lot to bring prices down. It makes a nice argument that the artificial knee that costs 2x reduces post-operative pain and lasts longer, and that may be a valid choice. But, too often, doctors don’t pay attention to the cost of the knee and people get one that costs 2X for no good reason other than the medical device rep for the more expensive knee was better at his/her job.

    • Price growth can indeed be difficult to pin down.

      However … When the prices for common procedures for people not using insurance can vary by a factor of 10, as we’ve documented in our reporting, one has to conclude that pricing is random.

      So what would happen if all prices were visible suddenly? If people could see that an MRI in San Francisco can cost $260 or $6,221? Would that change the equation?


      Maybe when enough direct price information reaches enough people, price growth will stop.

      Transparent markets benefit consumers.