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ACA Agonistes
Health Spending Hits All-Time High

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.

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  • Anthony

    “Analyst said its primarily due to a consumption boost from….” And as for bending cost curve, I just paid approximately $3,000 for seven stitches and care (And I have always been insured – network or providers didn’t change). Issue remains selling of health care.

  • MarkE

    The government is trying to create a synthetic version of a market in healthcare, eg., price controls, mandates, involuntary payment schemes, health insurance exchanges. They are going to pay more and more to try to imitate a market economy. There is no end to how expensive and Byzantine this approach can get.
    Why not just use a free market approach? Its cheap, easy and we do it in almost other sector of the economy. Prices would be lower, less medical care would be consumed, and most people would be much happier. We would still need some HMO type arrangement for poor people, but we would pay much less for it because the market would force the prices down for everyone.

  • Breif2

    Yay! We are spending less on healthcare! All praise Obama!

    [The preceding statement has been rendered inoperative.]

    Yay! We are spending more on healthcare! All praise Obama!

  • Anthony

    Immediate personal anecdote reflecting both high health care cost (which may correlate to consumption boost) and refutation of bending cost curve: seven stitches and care cost me approximately $3,000 ( and I have always been insured -neither my provider nor network changed). The selling of health care underlies headline all time high spending.

    • Breif2

      Ah, but no sum of money is too high to ensure your rapid healing so that you may promptly resume commenting here! 🙂

      • Anthony

        Thanks and healing has begun (quite rapidly by the way). I couldn’t pass up specific example of excessive dollars for less than 2 hours of service. Those without resources and wherewithal don’t stand a chance.

  • Andrew Allison

    Lest we forget, studies show that increased consumption of heathcare due to greater access has no effect on outcomes.

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