Jim Capretta: The 2009–2010 Slowdown in Health Spending

Newly reported official estimates from the actuaries at the Centers for Medicare and Medicaid Services (CMS) show nationwide health spending rose just 3.8 percent in 2009 and 3.9 percent in 2010 — the slowest rates of growth in five decades. The average rate of annual spending growth from 1997 to 2008 was 6.9 percent.

Naturally, speculation has started — as in this story from this past Saturday’s New York Times — over what might have caused this slowdown and whether it will continue.

There’s general agreement that the primary explanation is the deep recession. Whenever the economy slows and unemployment rises, incomes are constrained, so utilization of health services moderates, much as demand for other goods and services drops. The 2008–2009 recession was especially acute, so it’s not a surprise that the slowdown in health-spending inflation was pronounced as well.

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