It’s official: we are now spending more on health care than ever before. Not too long ago liberal wonks were touting the role the ACA was playing in a health care spending slowdown. Matt Yglesias, for instance, argued that the ACA was bending the cost curve downward. But a new government report shows health care spending rising to unprecedented levels in Q1. The slowdown is over. Business Insider has the basic facts:
Spending on health care grew an astounding 9.9% in the Bureau of Economic Analysis’ advance estimate of first-quarter GDP.It’s the biggest percent change in health-care spending since 1980, when health-care spending jumped 10% in the third quarter. Analysts said it’s primarily due to a consumption boost from the implementation of the Affordable Care Act. Adjusted for inflation, America is spending more on health care than ever before.Personal consumption grew by 3.0%, about half of which was due to the growth in health-care spending, said Ian Shepherdson, chief economist for Pantheon Macroeconomics.
The reactions to this news have been mixed. Some have claimed it at as a sign that the the ACA is working, because the newly insured can finally access care and are making up for lost time. Others predict that the spike is only temporary. Obamacare supporter Jonathan Cohn makes that case here with characteristic lucidity. The theory is that expanding insurance will release a lot of pent-up demand which will quickly subside. There are a lot of assumptions embedded in that prediction. Cohn, for example, links to an old Ezra Klein piece on this spike, which contains this line “in other words, 2014 is a one-time increase in spending level as we get 30 million new people covered.” Of course, only 8 million have been insured so far (and only a subset of that 8 were previously uninsured). If the administration is still aiming for 30 million over the next few years, the spike may last more than one year. And there’s good evidence that a more widely insured population has a general, lasting inflationary effect on spending.Whether the spike is temporary, medium-term, or here to stay, claims that the ACA was already bending the cost curve down were misleading. The ACA was about expanding access and very little else; the more often its supporters claim more for it than that, the more likely the facts are to show them up.