Econ prof David Cutler declares victory over rising healthcare costs:
Even as coverage efforts are sputtering, success on the cost front is becoming more noticeable. Since 2010, the average rate of health-care cost increases has been less than half the average in the prior 40 years. The first wave of the cost slowdown emerged just after the recession and was attributed to the economic hangover. Three years later, the economy is growing, and costs show no sign of rising. Something deeper is at work.
The Affordable Care Act is a key to the underlying change. Starting in 2010, the ACA lowered the annual increases that Medicare pays to hospitals, home health agencies and private insurance plans. Together, these account for 5 percent of the post-2010 cost slowdown. Medicare payment changes always provoke fears — in this case, that private plans would flee the program and that the quality of care in hospitals would suffer. Neither of these fears has materialized, however. Enrollment in private plans is up since the ACA changes.
If the PPACA is the cause in the slowing of healthcare cost increases, well, good. If the relationship between the PPACA and healthcare costs is one of false causality, we’ll know in due course. It continues to be too early to tell and, frankly, I’d have more confidence in the pronouncement if an opponent of the PPACA were to proclaim it was lowering costs than when the Obama Administration’s senior healthcare advisor does so.
There are two things we should also bear in mind. First, healthcare costs continue to rise at a multiple of the rate that other costs are. Until healthcare costs are constrained to something affordable, i.e. rising no faster than income, rising no faster than revenues, etc., they’re still increasing too fast. Second, comparing “healthcare inflation” to “general inflation” is specious since healthcare is a major component of personal consumption expenditures. If healthcare comprised 100% of the economy, healthcare inflation (in the sense of rising costs) would by definition be the same as the general rate of inflation. If healthcare were 50% of the economy, its costs were increasing and that increase was twice as fast as the overall increases, all of the increases would be attributable to healthcare.
Healthcare is now a bit over a sixth of the economy. If healthcare costs increase at 6% per year, that’s nearly all of the increases in the entire economy.
Employment hasn’t recovered, median income is down. I would think that has more impact on HC spending for most than some nominal GDP number. But then, unlike someone whose current and future employment hinges on saying all the right things, I clearly have an axe to grind….
You’re a secret idealist, aren’t you? No one ever admits they were wrong.
The jobs picture is slowly improving, (and outperforming most of the developed world) GDP rising, stock market setting new records every day, housing coming back in many places (sometimes too damned fast), deficit down, and now health care costs are slowing.
Add to that that we are out of Iraq, almost out of Afghanistan, and now seem unlikely to end up fighting Iran.
And contrast it with the end of the Bush years: financial meltdown, 700,000 jobs disappearing every month, housing collapsing, two wars raging, deficit heading for the stratosphere.
Death tolls, collapses and a looming depression all went away. Yeah, I can certainly see why Drew and Jan are nostalgic for the good old days and despise this president.
We don’t need a slowly improving job situation when we’re still millions of full time jobs short of where we were over a half decade ago with an increasing working age population. Only a partisan and a sadist would celebrate this as a good economy.
Seriously, what kind of fucking evil sadist lick-spittle partisan toady celebrates years of high unemployment, years of declining median income, an ever increasing share of the jobs that are available being part-time, just because his side gets elected?
I do. But only when I have reasonable confidence I was wrong.
Ah, so it’s Icepick up to his usual distortions and insane ranting.
Over 47 million on food stamps for over 12 consecutive months now. Time to celebrate out improving economy!
Icepick circa 1945: How dare you celebrate VJ day, you lickspittle FDR toady! There are millions dead and the world is a mess so let’s say nothing about the fact that the killing has finally stopped. No joy until Utopia is realized and we all have ponies! And especially no joy from anyone so long as I still suffer.
Do let us know when you’ve achieved sufficient personal happiness that it’s okay to point to improvements in life, Ice. We’ll all just pretend nothing is better until you’re happy.
This is the same David Cutler who wrote a memo, 3 1/2 years ago, regarding vital changes he thought should be made to the PPACA.
Do you know if Cutler’s concerns and suggestions were heeded and then correctively applied?
I was tempted to describe Michael’s “analysis” as simplistic, but there is no way to sugar coat it and retain intellectual honesty – its simple minded.
Here is an apropos Chicago Tribune editorial: Truth, Consequences and Obamacare.
I particularly agree with what they stipulate as a “first step” in fundamentally understanding the relationship between government and people:
<blockquote<Accept that government doesn't know what's best for everyone. That people can decide what coverage they need and can afford. A strong marketplace offers choices for every wallet. Obamacare's rules curtail those choices. Why, for instance, should only people under age 30 be eligible to purchase lower-cost "catastrophic" insurance? Pinching Americans' coverage choices is one big reason this law doesn't work.
My only observation is that the ACA was signed 3/23/10 and its rules are still being finalized, so to make claims about how it caused a slowing of growth since 2010 is hard to simply accept at face value, though the author mentions other contemporaneous sources of change (economic slowdown; technology; drugs). I think its a difficult issue to examine. (And what does he mean by 5 percent?)
I do believe, however, that regulated entities can begin changes in anticipation of actual legal change, but that is a very generalized claim. It would go something like this: In the late 2000s, healthcare providers recognizing rising fiscal problems hurting their bottom line and rising demands for comprehensive health reform legislation begin taking steps to improve efficiency without simply passing the increase on to the customer.
“In the late 2000s, healthcare providers recognizing rising fiscal problems hurting their bottom line and rising demands for comprehensive health reform legislation begin taking steps to improve efficiency without simply passing the increase on to the customer.”
By, Jove, PD, I think you are on it. Now imagine if the drum I beat – price incidence – had been allowed to work its magic years and years before.
What’s the distortion, Reynolds? Are median wages down during the recovery, or not? Are we still millions of full time jobs behind where we were when the last recession started or not? Is this or is this not the worst recovery of the post-war era? Have the food stamp roles increased at a precipitous rate during the recovery or not?
You are pinning the success of this recovery on things that aren’t positively impacting most Americans, such as you getting a better deal on your health insurance, and laughing at all the damage done.
As best I can tell, the reason you like the current recovery is solely because your team owns it. No doubt you’d be crying about a cratering labor force participation rate if it was someone from the other team in office.
The distortion, Ice, is in accusing me of “celebrating,” as you know perfectly well.
Now, maybe you can tell me where I’m factually wrong on anything I said. Let’s jump ahead and get to the part where you spew some more because you can’t admit that I didn’t misstate anything.
I think probably more “lickspittle.” You can’t go wrong with more lickspittle. It’s like cowbell.
Red:
I think you need to take a look at the link between arrogance and rightness. Basically, it’s like this: to be arrogant you have to occasionally be right. Otherwise you just become an object of ridicule. And as I said before, all that’s ever needed to prove you wrong is time. The clock is not your friend.
Sigh. Michael, and all you do is declare victory on the basis of flimsy logic and isolated and ill-considered statistics…….and move on.
Employment is a mess. Understated and propped up statistically by the underemployed and those who just gave up.
I gather — is the old icepick. He’s correct, incomes are nowhere.
The GDP report included a .8% inventory build. So the truth be told, without a final sales follow through we have 2.0% YTD GDP. Historically the country grows 3.0-3.5%. This is before what is effectively a tax from Obamacare. Also before the zero interest rate Fed policy that has re-inflated housing and subsidized cars………at the expense of savers, has had a chance to move back to mean. Read a recent housing report?
The deficit is at its worst level this far into a, ahem, “recovery” as ever in the last 50 years. And forecasts are disastrous.
Local municipalities are going broke.
I could go on.
Michael, you are like a doctor who tells a patient they have a disease, then after misdiagnosing it, trying umpteen non-helpful and expensive treatments including impairing them for years then waltzes in and tells the patient, “yeah, but your flu is getting better now!!”
Reynolds, you have said this is a B+ or A- economy for years now, and congratulated yourself repeatedly for voting for it. You have told me that poor people should lick your boots clean because, in your words, as a democrat they owe you. (Annie Gottlieb called you on that bullshit.)
Saying that hiring has picked up lately is laughable. It has, on a small scale, and that seems to be driven as much by employers converting FT jobs to PT jobs as much as anything else. The jury is still out on that. The jury is in, however, on the fact that the participation rate has cratered. When you celebrate the UE rate getting better, you ate celebrating people giving up. And no, most of that is not driven by demographics.
So please, tell me again about your concern for the people when you say this is a good economy be aide no one could possibly do a better job than Barry.
And the change in handle is inconsequential. It seems odd that TB was the only person (other than Schuler, who would have seen the same email address used, even if he checked nothing else) seemed to notice.
Red, I quit following economic data in more than a cursory fashion last summer. Are they still fucking around with the deflator for the GDP reports?
Then there’s this:
Health insurance plans only count subscribers as enrolled in a health plan once they’ve submited a payment. That is when the carrier sends out a member card and begins paying doctor bills.
When the Obama administration releases health law enrollment figures later this week, though, it will use a more expansive definition. It will count people who have purchased a plan as well as those who have a plan sitting in their online shopping cart but have not yet paid.
WINNING!
. . . in the shopping cart? What if its in the shopping cart then disappears from the shopping cart? What if the shopping cart crashes into another and falls apart? What if the shopping cart also is the temporary residence of a homeless bum, who keeps piling healthcare plans inside for cushions? What if missing healthcare plans begin reappearing in the shopping cart, crushing all occupants and stray kittens? What if men in black appear at your door, insisting you put healthcare plans in your shopping cart? What if the Mayor of Toronto launches a cruise missile strike at the shopping cart, what then? Obama will still count it then, won’t he?
PD, that was an hilarious sequence of events!
Ice:
Never once. I’ve said Obama was a B+ president. Not the same. Not that you care. Facts are irrelevant to you. In fact, you’re a pretty good example of what is one in reality one of my central theses: that in politics policy is far less important than raw emotion.
You’re all raw emotion, Ice. It’s all about your feelings of inadequacy, your fear and self-loathing. That’s what drives your “politics.” And I think I’ll stop there and delete the next paragraph. Enough.
Red:
That’s very convincing. Almost as convincing as your last half dozen full-of-shit predictions.
Are you even any good at your job? Or are you the guy they bring along to play golf with and laugh at behind your back? Because for a guy who’s supposed to be some sort of expert, you sure are wrong a lot.
Cutler is correct that there are cuts in Medicare spending. We have had to deal with some of the Medicare cuts which are already happening. Small but real. (Please note that he said it accounts for 5% of the decrease, so Dave sets up a strawman when he says that the ACA is responsible for the slowdown. That is clearly not true, just a bit of the slowdown. Will have to see further effects when it is fully implemented.) They are also requiring that we maintain quality at the same time.
Steve
Steve,
The 5% you keep quoting is nothing more than a old talking point. Predictions, from all sides of the political spectrum, have calculations far higher. To dismiss these, while still holding on to future claims of success, is simply a lopsided way to deal with the entire picture that is evolving.
@steve, I thought the five percent was ambiguous,* in large part because Cutler makes broad claims of success. I don’t think Schuler is setting up a straw man.
* Does he mean that there has been a ten percent reduction in the increase of healthcare cost, of which five percent of the reduction is credited to the ACA (which others might write as 50%)?