“Health care spending as a proportion of total national spending has been flat, at approximately 17%, since the late 2000s, meaning that health care cost growth hasn’t exceeded growth in the gross domestic product, on average. Per-beneficiary Medicare spending grew at an average rate of 6.6% per year between 1987 and 2005, but by 2.2% per year between 2013 and 2019.
[..] low growth has persisted well beyond the Great Recession for all types of insurance. Putting aside the spike in health care spending that occurred during the Covid-19 pandemic, growth in per-capita national health expenditures has been low by historical standards for approximately 20 years.
[..] changes in payment rates and beneficiary characteristics accounted for roughly half the difference in per-beneficiary spending growth between the 2008–2011 and 2012–2018 periods. Variable growth in spending on prescription drugs has contributed to slower growth in overall health care spending over the past decade. After observed factors are accounted for, however, a substantial, unexplained downward trend in Medicare spending growth remains. [..]
In much the same way that the threat of health care reform and the rise of managed care led to reduced spending growth in the mid-1990s, evidence suggests that the burning platform of a new era of “value-based care” in which clinicians and health care organizations would be held accountable for the cost and quality of care has fostered practice redesign and an orientation toward high-value technology. Without value-based payment models, there would be no business case for implementing various new technologies. Examples include products that automatically inform primary care practices when one of their patients is admitted to a health care facility, point-of-care tools that provide information on referral options and their costs, and predictive analytics that can help organizations determine which patients to focus on for care-management interventions and which care processes to target for improvement.
It’s impossible, of course, to measure what would have happened absent the many changes that can be attributed to value-based strategies and policies. The “value zeitgeist” and its contribution to slower spending growth can’t be precisely quantified, but there are many signs that a value-based orientation has affected operations and strategic decisions since the early 2000s. The value orientation has led to increased reliance on the nonphysician workforce, supported the passage of expanded–scope-of-practice laws, changed the way health care executives think about capital investments, and affected investment and pricing decisions by manufacturers of drugs, devices, and digital health technologies. The increased influence of and demand for the Institute for Clinical and Economic Review’s cost-effectiveness evaluations of new technologies are evidence of this shift, as is the limited adoption of costly technologies such as proton-beam therapy, which many observers predicted would explode in popularity. [..]
This shift in spending trends hasn’t necessarily led to affordable health care. Health care prices in the United States are high and rising, in part because of consolidation among health care organizations. Insurer consolidation has also led to high profit margins and growing administrative costs. Increases in commercial premium rates remain high — although when adjusted for inflation, premium increases have been below those in previous decades. The financialization of health care has resulted in many groups extracting revenue along the care continuum. [..] Just because health care spending has grown more slowly in recent years than it did in previous decades doesn’t mean the health care system is efficient. Instances of people receiving too little care or low-value care are numerous, as are examples of waste caused by profit-seeking behaviors.
Still, the slow growth in health care spending has brought some budgetary relief, which leads to questions about how to sustain it. We are concerned that this trend in spending growth will reverse if the federal government and other payers neglect to consider the incentives created by their policies. The 2023 national health expenditures data suggest that this change is already under way, potentially owing to the shift in focus away from value-based models during the pandemic and postpandemic periods. We believe payers should continue to use alternative payment models to establish a business case for health care organizations and product developers to innovate to create value.”
Full editorial, MB Buntin, E Meara and CH Colla, New England Journal of Medicine, 2025.4.12