This report analyzes recent trends in health care costs, the forces driving those trends, and their likely economic benefits. The report includes the following findings about recent trends: • Health care spending growth is the lowest on record. According to the most recent projections, real per capita health care spending has grown at an estimated average annual rate of just 1.3 percent over the three years since 2010. This is the lowest rate on record for any three-year period and less than one-third the long-term historical average stretching back to 1965. • Health care price inflation is at its lowest rate in 50 years. Recent years have also seen exceptionally slow growth in the growth of prices in the health care sector, in addition to total spending. Measured using personal consumption expenditure price indices, health care inflation is currently running at just 1 percent on a year-over-year basis, the lowest level since January 1962. (Health care inflation measured using the medical CPI is at levels not seen since September 1972.) • Recent slow growth in health care spending has substantially improved the long-term Federal budget outlook. The Congressional Budget Office (CBO) has reduced its projections of future Medicare and Medicaid spending in 2020 by $147 billion (0.6 percent of GDP) since August 2010. This represents about a 10 percent reduction in projected spending on these programs. These revisions primarily reflect the recent slow growth in health care spending.
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