Has the United States Bent the Health Care Cost Curve?

In 2024, medical spending as a share of GDP was 15% below forecasts made in 2010 and only marginally higher than in 2010. Relative to expectations, the savings were nearly $1 trillion in 2024. In light of this prolonged period of slower growth, we ask the question: has the United States bent the health care cost curve? We start with a model of medical spending that incorporates both the development of new technologies and the equilibrium use of those technologies. Technology development and incentives around its use may add to or subtract from spending growth. We then examine the drivers of the spending slowdown empirically. We attribute slower medical spending growth to five factors: the development of technologies that simultaneously improve health and lower cost; long-run supply elasticities that exceed short-run elasticities; improvements in population health; reimbursement changes that reduce demand and make demand more price elastic; and reductions in the rate of price increases, likely driven by some of these same demand factors. Because these cost slowing mechanisms are expanding over time, we conclude that the United States has bent the health care cost curve, though not as much as it could be or will need to be bent.