Health Spending in America—Self-Rationing Slows Cost Increases

The Big Headline under the banner of Health Economics this week is the statistic that growth in U.S. national health spending slowed to an anemic 3.9% in 2010 — the slowest rate of growth in the 51-year history of keeping the National Health Expenditure Accounts.

Before American policymakers, providers, plans and suppliers pat themselves on their collective back on a job well-done, the heavy-lifting behind this story was largely undertaken by health consumers themselves in the form of facing greater co-pays, premiums and prices for health services — and as a result, self-rationing off health care services and utilization, which negatively impacts providers and suppliers alike.

Thus, hospital margins were tighter in 2011, compromising credit ratings from the likes of Fitch and S&P, and most drug and medical device companies failed to meet earnings expectations of profit-starved Wall Street investors...