A sharp and surprisingly persistent slowdown in the growth of health care costs is helping to narrow the federal deficit, leaving budget experts trying to figure out whether the trend will last and how much the slower growth could help alleviate the country's long-term fiscal problems.
In figures released last week, the Congressional Budget Office said it had erased hundreds of billions of dollars in projected spending on Medicare and Medicaid. The budget office now projects that spending on those two programs in 2020 will be about $200 billion, or 15 percent, less than it projected three years ago. New data also show overall health care spending growth continuing at the lowest rate in decades for a fourth consecutive year.
Health experts say they do not yet fully understand what is driving the lower spending trajectory. But there is a growing consensus that changes in how doctors and hospitals deliver health care — as opposed to merely a weak economy — are playing a role. Still, experts sharply disagree on where spending might be in future years, a question with major ramifications for the federal deficit, family budgets and the overall economy.
Part of the slowdown stems from "the recession and the loss of income and wealth" causing people to cut back on health care, Douglas W. Elmendorf, the director of the Congressional Budget Office, said last week. But he added that a "significant part" of the slowdown "probably arises from structural changes in the health care system."
Some insurers have moved away from simply paying per procedure by giving health care providers financial incentives to reduce complications and rehospitalizations, for instance. Doctors, nurses and hospitals have also taken steps to reduce wasteful treatments. Many of the changes predate the 2010 health care overhaul, but the law has also contributed to the changes by offering some financial incentives, health care experts say.
Even if slower growth persists, the cost of health care poses one of the greatest threats to the country's fiscal health. It threatens to consume a larger proportion of the overall budget, meaning larger deficits, cuts to other programs, higher taxes or some combination of the three. Remaining on a lower cost trajectory would reduce the pressure on Democrats and Republicans seeking to put the country on a sounder fiscal path.
"We're not going from unsustainable to sustainable," said Jared Bernstein of the Center on Budget and Policy Priorities, a liberal-leaning research group in Washington. "Even if the recent changes persist, we're not done in terms of achieving sustainability in health care cost growth, but we have more time to figure out what's working without hacking away at social insurance," added Mr. Bernstein, a former economic adviser to Vice President Joseph R. Biden Jr.
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