Wednesday, January 4, 2012

Bending the Curve?

Via an interesting post by Chris Conover, I came across this recently released National Health Expenditure report, which has data on health-care spending up through 2009.  This data includes a state-by-state breakdown of personal health-care spending (a number that includes direct expenditures on health-care but does not include administrative costs).

Digging into these numbers allows one to calculate (roughly) the growth of health-care spending in each state from 1991 to 2007.  This data set tells an interesting story for Massachusetts after the passage of health-care reform there: after the passage of Romney's reforms, the rate of per capita health-care spending growth slowed in Massachusetts both in absolute terms and relative to the national average.

Here's a chart I put together looking at the cumulative growth over two periods: from 2004 to 2006 (prior to Romneycare) and from 2007 to 2009 (after the measure was applied).  I've included the US national average as a whole as well as the New England average in order to situate Massachusetts in its local context.  New Hampshire offers the example of a New England state which did not engage in Romney-style reforms, and Ohio offers a counterexample of a Midwestern state with relatively slower-growing health-care costs.  Texas, often touted as an alternative model for the nation, also helpfully sets up a contrast with Massachusetts.  This chart looks at the cumulative percentage change in per capita personal health-care spending over the 2004-2006 and 2007-2009 periods.

Spending Growth 2004-2006             Spending Growth 2007-2009
US National Avg11.40%7.86%
New England9.23%9.15%
TX12.14% 9.05%

Perhaps in part due to the recession, the rate of growth for health-care spending dropped for the nation as a whole (though spending did still grow).  However, it's worth noting that, in the years after Romney's reforms went into effect, the rate of growth for health-care spending in Massachusetts dropped even faster than the national average did.  Between 2004 and 2006, health-care spending in Massachusetts grew almost 27% faster than it did for the nation as a whole; between 2007 and 2009, it grew only 5% faster.  After Romney's reforms, Massachusetts went from having a health-care spending growth rate well above the national average to one just a little bit above.  For example, between 2008 and 2009, personal health-care spending increased at a rate of 3.8% in the US, while Massachusetts saw its spending increase by 3.9%.  Compare that to the changes between 2005 and 2006: US spending grew at 5.3%, but Massachusetts spending grew at 7.6%.  Situating Massachusetts in the context of the rest of New England makes the change in spending rates even starker: prior to Romney's reforms, Massachusetts personal health-care spending grew faster than the New England average most years.  After his reforms, it grew slower than the New England average (often having one of the lowest rates of health-care spending growth in the region).  These numbers suggest that Texas is doing a worse job at taming the rate of health-care spending growth than Massachusetts (though, for the moment, per capita health-care spending in Texas is lower than that of Massachusetts).

Massachusetts seems to have especially slowed down the rate of growth in hospital spending.  Between 2004 and 2006, Massachusetts hospital spending jumped 16.5%; between 2007 and 2009, it only climbed 5.5% (a 67% reduction in the rate of growth).  US spending on hospital care grew 12.7% between 2004 and 2006; between 2007 and 2009, it grew 8.6% (a 33% reduction in the rate of growth).  Spending in Massachusetts hospitals rose much more slowly than the national average.  One of the key premises of Romneycare was that bringing all of the commonwealth into the health-care system would lower the need of hospital use (especially the use of emergency room care) and thereby lower spending at the hospital level.  These numbers seem to suggest that something like that may be happening.

In many areas of health-care spending, the rate of growth for spending in Massachusetts either fell more than it did for the nation as a whole or fell at roughly the same rate.  This data would seem to muddy the waters for the claim that Romney's reforms caused health-care spending in Massachusetts to skyrocket.  Since Romneycare, health-care spending in Massachusetts (at least until 2009) grew more slowly than it did in many other states and also grew much more slowly compared to the rate of spending growth in Massachusetts before Romneycare took effect.

Health-care spending depends upon a variety of factors (including population aging and economic growth), so this data set does not tell the whole story regarding the effect of the 2006 reforms on health-care spending.  It does, however, pose a challenge to the argument that Romney's reforms uniquely inflated health-care spending in Massachusetts.  In terms of raw health-care spending, Massachusetts seems to have bent slightly down the curve of growth---compared to many other states and, in many respects, the nation as a whole.

(Of course, the rate of growth in health-care spending is not the sole deciding issue for Romneycare: other questions about long-term sustainability, the role of government coercion and spending, and other topics are also very important.  Nor is there a direct correlation between health-care spending and private insurance premiums, which seem to have increased in recent years.  Moreover, data for years after 2009 might tell a more complicated story.)

(Crossposted at FrumForum)

UPDATE: See this post for more on health-care spending in Massachusetts.


  1. I like your methodology but you are right that subsequent events will likely tell a different story. The big growth in costs that everyone here in Massachusetts is complaining about happened in 2009 and 2010. As for this analysis:

    (1.) your control years are wrong because the Massachusetts healthcare market was in turmoil 2004-2006 knowing "reform" was coming (maybe use 1999-2004 but there were also equally major legislative "reform" changes in some of those years that skew the numbers),

    (2.) your proof years are wrong because RomneyCare did not become effective until January 1, 2008 (in fact there was really no significant penalty until January 1, 2009), and

    (3.) you need to deduct nursing home costs from your apparent totals (because RomneyCare had nothing to do with nursing home costs).

    So when the CMS posts the 2010 and 2011 numbers, we should take a look.

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