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Slowed health costs to help deficit

– People with health insurance saw slower increases in their medical costs from 2009 to 2011, signaling potential structural changes in the industry that could cut health care inflation and save the U.S. government hundreds of billions of dollars, according to two studies.

The changes include greater use of generic drugs, higher out-of-pocket costs and more efficient care, a trend encouraged by the 2010 health care overhaul, said David Cutler, a Harvard University health economist. If they permanently slow growth, the government may reap $770 billion in unexpected savings from projected expenditures by 2021, wiping out a fifth of the budget deficit, one of the studies found.

“Folks have gotten the message: The money flows are going to be different, and they’re very much responding to that,” said Cutler, who co-authored one of the reports.

The two studies aim to shed light on why the annual growth of medical spending slowed from a high of about 8.8 percent in 2003 to an average of about 3 percent per capita from 2009 to 2011, according to data reported in January by the Centers for Medicare and Medicaid Services. Total health spending in the U.S. amounted to 17.9 percent of gross domestic product in 2011 or about $2.7 trillion, the agency said.

While neither study calculated a direct effect from the 2010 Affordable Care Act, Cutler, a former Obama adviser, said in a telephone interview that its influence is “gathering steam over time. It’s not a coincidence these things are happening at the very same time that policies are starting to penalize re- admissions, infections and things like that.”

Opponents of the 2010 law have said the slowdown is almost entirely because of the recession, and they expect when the law is in full force next year, spending growth will begin to surge again.

In one study, researchers analyzed health spending from 2007 to 2011 by employees with insurance supplied through 150 large companies. The growth of their medical spending dropped from more than 5 percent annually in 2009, adjusted for increases in out-of-pocket spending, to less than 3 percent in 2010 and 2011, the research found.

“I don’t want to downplay the importance of the recession,” said Michael Chernew, a professor of health-care policy at Harvard Medical School in Boston who also was an author of the study. “But even if you get rid of at least the direct effect of the recession, there was really something else going on.”

The indirect effect is harder to gauge, he said. While large firms maintained health insurance for their employees, the recession may have pressured them to work harder at holding down spending growth, he said.

“An alternative theory is that the slowdown in health-care spending growth reflected structural changes in the factors underlying the health-care system and that spending growth will remain low for some period of time, even after the economy fully recovers from the recession,” Cutler said in his paper.