Health care spending on the rise

Earlier this year, the CCMS released their annual report on health care spending and the news was surprisingly good:

Total healthcare spending in 2012 came in at $2.79 trillion—up just 3.7 percent over the previous year and continuing a four-year trend of significantly reducing the amount of growth in annual healthcare expenditures.

By way of comparison, before the recent recession, we were averaging annual increases in health care spending of over 7 percent during the calendar years 2000-2008.

The current numbers represent the slowest rate of growth since the government began tracking the data in 1960.

Not only were the numbers terrific on an historic basis but, thanks to a growing economy combined with lower healthcare spending, what we shell out for health care actually decreased as a percentage of the total economy—down to 17.2 percent from 17.3 percent—for the first time since President Clinton inhabited the White House. While this may not appear to be a significant drop, the mere fact that healthcare spending as a percentage of GDP is dropping at all is a pretty big deal.

Of course, Obamacare supporters jumped on those numbers, claiming all sorts of magic as a result of the bill's passage.

But what happens if health care costs start to rise again - as they apparently are now.

New York Times:

For years, because of structural changes in the health care delivery system and the deep economic downturn, the health care “cost curve” — as economists and policy makers call it — had bent. Health spending was growing no faster than spending on other goods or services, an anomaly in 50 years of government accounts.

But perhaps no longer. A surge of insurance enrollment related to rising employment and President Obama’s health care law has likely meant a surge of spending on health care, leaving policy experts wondering whether the government and private businesses can control spending as the economy gets stronger and millions more Americans gain coverage.

“Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system,” Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a statement.

The news comes as President Obama promotes the success of the Affordable Care Act in covering more Americans at less cost than anticipated.

“Under this law, real Medicare costs per person have nearly stopped growing,” Mr. Obama said at a news conference on Thursday as he announced that eight million people had signed up for insurance coverage through the law’s exchanges.

“Those savings add up to more money that families can spend at businesses, more money that businesses can spend hiring new workers,” he said, adding that the government’s budget scorekeeper “now says that the Affordable Care Act will be cheaper than recently projected.”

But some health care experts and economists said that an expanded use of the health system might start to have the opposite effect. Americans feeling more economically confident might demand more procedures from doctors and hospitals. Insurers paying more money for those procedures might, in time, increase premiums, cutting into wage gains. The government might end up spending more on the health law than current projections imply.

“We knew this was coming,” said Douglas Holtz-Eakin, a former head of the Congressional Budget Office and a prominent Republican economist, of rising spending because of the coverage expansion and improving economy. “The question now is whether we can hold spending down.”

The downturn in health care costs in recent years can almost completely be attributed to the Obama economy - less money in people's pockets means less spending on doctor visits and drugs. But one wonders if the decrease was the result of Obamacare putting pressure on the "cost curve," why not blame the increase on Obamacare too?

This would be logical, but Obamacare supporters have decided to play dumb and claim not to know why health care costs are rising the fastest since 2004. We know what's changed between 2013 and 2014. Getting Obamacare supporters to admit it is the real challenge.

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