The Healthcare Spending Rebound

Philip Klein notes it:

According to government data analyzed by the Altarum Institute, national health spending spiked 6.7 percent in February 2014 compared with the same month a year earlier, representing “the highest rate since March 2007, just prior to the recession, which officially began in December 2007.” There are a number of caveats to apply to this data. To start, it’s still subject to revision, as with all government economic data. It also is still too limited to represent enough of a trend. But if the data is confirmed by subsequent reports and does turn into a trend, it would have major implications for Obamacare.

Cohn talked to various experts about what to expect in the future:

[P]retty much all of these authorities agree on the general shape of things to come. Health care spending will acclerate for a little while, partly because of Obamacare’s coverage expansion but mostly because of the economic recovery. Then it will subside. It will, in other words, be like a wave: Spending will go up, crest, and then return to a lower level.

The good news is that, once the wave is done, year-to-year increases in health care spending should be significantly lower than the historical average. Economists like to talk about “excess growth”—that’s the difference between how quickly health care costs are rising and how fast the economy, measured as Gross Domestic Product, is growing. Over the last 50 years, excess growth has been about 2.6 percent. But the average in the last 20 years has been down to 1.6 percent, thanks to structural changes, some of which date back to the 1990s when insurers first started using managed care. There’s every reason to think that, once the economy fully recovers and Obamacare’s expansion is in place, health care spending will be back to rising at something like the level it was before.

Last week, Kliff explained why these numbers matter so much:

Even if a small portion of the health cost slowdown was structural – and latest decades to come – that could make a huge difference for overall health care spending. The Kaiser Family Foundation, for example, estimates that less than a quarter of the spending slowdown is attributable to permanent changes in the health care system. But even that small fraction that is permanent would cut about a half-trillion in health care spending over the next decade.