Midday Report: Health Care Inflation Slows; Will It Last?

Inflation in the healthcare sector has slowed dramatically. Is that a temporary blip, or the start of a long-term trend?

Since the recession hit, medical inflation has been roughly three percent, far less than the 7.4 percent long-term average from 1980 through 2008.

The recession was certainly a factor, but a series of research reports published in Health Affairs magazine says there are other more important factors at work that could significantly lower the long-term cost of medical care.

The authors, from Harvard University and elsewhere, say that if the trend persists over the next decade, the United States could spend $770 billion less than projected, substantially cutting the budget deficit.

The researchers say their findings "suggest cautious optimism that the slowdown" in health spending may persist.

That's the good news. The bad news: individually, we're spending more on health care. Actual out-of-pocket expenditures continue to rise, as we pay higher deductibles, higher co-pays, and a greater share of employer-sponsored insurance plans.

That means families are picking up a greater percentage of the health care burden. The study says that this accounts for about 20 percent of the decline in overall health spending.

Still, we could all benefit in the long run as lower health care spending could have a significant impact on the deficit.

Other key factors include the trend of more doctors affiliating with hospitals, automating health data management, and lower Medicare payment rates. There's also this: the development of costly new medical treatments and medications has slowed down.

And experts note that many doctors and hospitals now accept what's known as "bundled payments" for a patient's overall treatment, instead of charging for each and every procedure. There are also efforts that focus on higher-quality care instead, of more care.

And the study authors say the new financial incentives in the Affordable Care Act –- aka Obamacare -– will lead the health care system in new directions, but that Medicare will remain a major policy challenge.

-Produced by Drew Trachtenberg

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