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Health costs in 2013 grew at slowest rate since 1960

  1. Health costs grew 3.6 percent in 2013 — the slowest rate since the government started keeping track in 1960.
  2. This is the fifth straight year of slow health cost growth.
  3. It's not totally clear what's driving the slowdown: It could be an after-effect of the recession — or it could be a sign of a more permanent change to American health care.

Health cost growth hits a new low

The 3.6 percent growth that the Centers for Medicare and Medicaid recorded in 2013 is the smallest increase the agency has ever seen since it started tracking medical spending in 1960:

health affairs graph

(Health Affairs)

The second-smallest increase came in 2009, when health costs grew 3.8 percent.

Taken together, this shows that health care costs have grown really slowly for five years now. Some of this is likely cyclical: when the economy goes south, patients tend to use less medical care. But there are also hints that some of the slower growth is due to more structural changes in the health care sector — and could stick around for at least the next decade are so.

One important factor: Medicare's slow growth

Here's one especially noteworthy tidbit from CMS' new health spending data, about how Medicare spending has been particularly slow in recent years:

Fee-for-service per enrollee growth also remained low (an increase of 0.7 percent in 2013, after a decline of 0.3 percent in 2012), as a result of slower increases in outpatient hospital utilization, a decline in the volume and intensity of physician services, the budget sequestration, and the continued impacts of the ACA-mandated payment update reductions.

What the government is saying there is that, in the Medicare program, the amount of services that doctors provided outside of hospitals actually went down in 2013.

The Medicare population tends to be one that is a bit immune to recessions and economic cycles. It is largely comprised of retirees, many of whom are living off a fixed income. So the fact that this particular population is going to the doctor less could suggest something more permanent changing about the type of care that American patients receive.

More evidence for the "get more, pay less" era of American health care

Health care spending has, for decades, followed a consistent pattern. America pays more and more for health care — and gets less and less.

Between 1990 and 2012, the insured rate in the United States fell two percentage points, from 86.6 to 84.6 percent. If the insured rate had just held steady, six million more people would have been covered in 2012.

While we were covering less people, we kept spending more on health care. National health spending, over that time period, rose from 12 percent of the economy in 1990 to 17.2 percent in 2012. Adjusted for inflation, health-care spending rose from $1.1 trillion to $2.8 trillion over those 22 years.

health spend more get less

That's been the typical story of American health care: a lousy deal where we get less and spend more.

But there's a growing body of evidence that this trend is changing; that we're starting to get a shockingly better deal in a way that has giant consequences for how America spends money. We've been calling it the "get more, pay less" era: a decade where experts project health care costs will grow more slowly than they did in the 1990s and 2000s — even as Obamacare adds millions of Americans to the rolls of the insured.

More specifically: health care costs grew, on average, 2 percent faster than the economy between 1990 and 2008. Health spending took over an ever-growing share of the economy. Workers barely got raises; skyrocketing premiums ate up most of their additional wages.

Experts say the next decade will be different. Actuaries at the Center for Medicare and Medicaid Services project health care costs to grow 1 percent faster than the rest of the economy between 2013 and 2023.

This is startling: over the next decade, forecasters think our health spending will grow at a slower rate than it did in the 1990s and 2000s, even as millions and millions of Americans gain access to health insurance. After two decades of spending more and getting less, we're entering an era of spending less and getting more. It's bizarro health spending world.

You can read more about the "spend less, get more" era of health care — and how these new numbers fit into that — here.