Last week, Yuval Levin explained that the recent deceleration in the growth of medical expenditures isn’t in fact a new phenomenon — rather, it started in 2003, when health cost inflation fell from 9.7 percent in 2002 to 8.4 percent, and it has stalled at 3.9 percent between 2009 and 2011. One optimistic interpretation is that as employers increasingly rely on higher-deductible plans designed to encourage cost-consciousness, consumers have become more savvy and medical providers are responding. But as Yuval makes clear, there is good reason to believe that as the population ages, health cost inflation will once again accelerate. For example, we’ve discussed the costs associated with dementia. A recent RAND report estimates that the cost of treating dementia on a per adult basis will increase by 79 percent from now until 2040, and the number of adults afflicted with dementia is expected to increase dramatically over the same interval. 

Another issue, which consultant Tom Emerick raises, is that even a slight decline in the number of workers aged 55 or above will tend to reduce health cost inflation by a disproportionate amount. It could be that we’re seeing a temporary dip in medical expenditures by boomers who’ve been downsized that will be matched or exceeded by an increase in medical expenditures once they are eligible for subsidized care.