Why lowering health costs should be a key adjunct to slowing health spending growth

If U.S. health care spending growth continues unchecked, the nation will have far less in the future to purchase other essentials, including education, infrastructure, and consumer goods. The point at which nonhealth spending could begin a precipitous decline was previously projected in a paper by Michael Chernew and colleagues to be 2050, unless the rate of health cost growth can be lowered (that is, "bending the curve"). This paper evaluates alternative approaches. First, it looks at the effect on health and nonhealth spending of a one-time reduction in health costs--for example, through a sharp reduction in overuse of medical services in higher-cost regions of the country. It concludes that a one-time reduction in the range of 20-35 percent would delay Chernew's projected decline in nonhealth spending by ten to twenty years. Second, it looks at the effect of combining up-front spending reductions of this size with a longer-range cut in the rate of growth of health spending from 2 percentage points to 1.5 percentage points annually. It finds that this scenario would postpone a major drop in nonhealth spending almost until the twenty-second century. The paper argues that substantial up-front reductions in health spending are therefore worth pursuing to protect the nation's long-term economic growth.