What Has Caused the Slowdown in Health Care Spending?
Not ObamaCare. The slowdown occurred before the Affordable Care Act was passed and the growth rate has been flat since then.
Taken from Joe Antos, Testimony before the Senate Committee on the Budget.
Nice graph!
Right?!
And now that healthcare is growing with the economy, is there still a problem?
I am not entirely sure that the economy is truly growing though.
The GDP growth down spike looks scary right?
I bet some comes from the non increases in medicaid and medicare
Yes, stagnation in budgeting.
Some of the theories include: 1) In the downturn many people lost their jobs and their employer coverage with it. 2) People who were struggling financially dropped coverage before other expenses and didn’t consume health care unless they had to. 3) Those who still had jobs increasingly turned to high-deductible plans. 4) Employers began to encourage consumerism by offering high-deductible plans.
“People who were struggling financially . . . didn’t consume health care unless they had to”
Fascinating.
So it’s a real theory that, when people are not struggling financially, they consume “health care” even when they don’t have to?
“Those who still had jobs increasingly turned to high-deductible plans.”
Even more fascinating.
So it’s also a real theory that when people pay for “health care” out of their own pockets, in ceases to be counted as medical care spending?
Glad I tuned in today.
These all seem like pretty obvious things that happen in an economic downturn with healthcare.
Johnny says “pretty obvious things that happen in an economic downturn”
And when – if – the economy recovers? I think the medical spending decline is not structural, but temporary – and will evaporate as the economy recovers. That cycle has happened more than once before. I think that’s the perspective of Joe Antos, whose Congressional testimony is linked above. (Joe Antos is an economist specializing in health policy and market-based reform; he is also a resident scholar at American Enterprise Institute).
But notice that Antos’ testimony is about “health care spending” yet Devon Herrick’s comments all relate to insurance cost. They aren’t the same things. Besides, I think the insurance explanations offered by Devon Herrick are not particularly persuasive (or perhaps just ill-expressed) and that is specifically what my prior comment addresses.
For example, if people only consume “health care” when they have to, as Herrick suggests, then why would changing economic conditions affect them? And whether a particular medical expense is, or is not, covered by medical insurance, the total amount spent remains the same; all that changes is the distribution of payments by source. The total amount spent remains the same, despite Herrick’s suggestion to the contrary.
In contrast, Antos addresses the question of why medical spending has declined:
“when employees are responsible for more of the cost of cost of health services, spending declines”
That effect on spending has been thoroughly documented since at least 1980. It’s mainly the effect of delivering fewer medical services. But even if people are seeking fewer services, inflation is still driving unit costs upward. Thus an increase in frequency of services, when it comes, will be compounded by the continuing cost inflation. We will then experience a bolt and a jolt, so to speak.
Keep in mind there are many possible explanations for a reduction in the frequency of services. The economy plays a part; the trend toward people paying a greater share of their own medical expenses plays a part (this has been going on steadily since at least the late 1970’s); simply random fluctuation reflecting prevalence and severity of diseases over time plays a part. There are other factors, too.
I think Antos is saying that there do not appear to be any structural changes to the basic conditions driving medical costs upward. Therefore what we see is a temporary respite.
Of course, changing these conditions structurally was one of the promises of Obamacare – i.e., “bend the cost curve”. Sadly Obamacare, like Mr. Herrick, focuses on insurance, not on medical cost. Therefore it does not contain the tools necessary to deliver on its promise. The reduction to the growth in medical costs in recent years did not happen because of Obamacare and, as the economy recovers, Obamacare is likely to accelerate the growth in those expenses. Unfortunately for the taxpayers.