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Policy: Economy

Jonathan Chait hasn't 'debunked' anything

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Beltway Confidential,Opinion,Philip Klein,Obamacare,Health Care,Economy,CMS

Back in May 2013, New York magazine's Jonathan Chait wrote:

The recent slowdown in health-care costs is one of those facts, like climate change or the rapid growth after Bill Clinton raised taxes, that flummoxes American conservatism. The slowdown of health-care costs is one of the most important developments in American politics. The long-term deficit crisis — those scary charts Paul Ryan likes to hold up, with federal spending soaring to absurd levels in a grim socialist dystopian future — all assume the cost of health care will continue to rise faster than the cost of other things. If that changes, the entire premise of the American debate changes. And there’s a lot of evidence to suggest it is changing — health-care costs have slowed dramatically, and experts believe it’s happening for non-temporary reasons.

I agree with Chait that the issue of health care spending is an important one, which is why I found it newsworthy that health care spending rose at a 9.9 percent rate in the first quarter of 2014 - the fastest pace since 1980 - according to a Wednesday estimate from the Bureau of Economic Analysis.

Yet in a Wednesday post headlined, “Today's Anti-Obamacare Talking Point, Debunked in Two Charts,” Chait took aim at my item on rising health care spending. But he doesn't actually contradict anything I wrote.

Instead, he noted that health care costs were expected to spike in 2014 as more individuals gained access to health insurance as a result of President Obama's health care law. That's fine as an argument for not reading too much into the data. But at no point did I write that the BEA report was definitive proof that costs would explode for as far as the eye could see. In fact, I even noted that the estimate for health care spending was, “preliminary and subject to revision in the coming months.” So I'm not sure what he thinks he has “debunked.”

As far as the broader issue, there's been a huge debate within the health care policy community as to whether the historically low rate of growth in health care spending that was recorded from 2009 through 2012 could be attributable to the health care law or other long-term factors - or if it was temporary, and largely driven by the economic downturn.

The Obama administration has tried its best to take credit for the relative slowdown. In November, Obama declared, “I'm not going to walk away from something that has helped the cost of health care grow at its slowest rate in 50 years.”

In January, a blog post on the White House website touted a report by actuaries at the Centers for Medicare and Medicaid Services, which found that national health spending had grown at a relatively slow historical rate in 2012. “For years, health care costs in America skyrocketed, with brutal consequences for our country,” the post noted. It went on to say, “The Affordable Care Act, for the first time in decades, has helped to stop that trend.”

The post concluded: “The slowdown in the rise of health care costs, thanks in part to the Affordable Care Act, has already begun to pay dividends in the form of savings for American consumers, lower costs for businesses, and our rapidly declining deficits. This work will continue in 2014 as we bring millions more into the health insurance system.”

Interestingly, in the CMS report that the White House was referring to, actuaries said that the health care law “had a minimal impact” on health spending through 2012 and that the slowdown was consistent with what typically happens during an economic downturn. In a separate report released last year, CMS said that Obamacare would increase spending by $621 billion through 2022 relative to the pre-Obamacare status quo that Obama himself called “unsustainable.”

Over the past several months, we've started to see evidence that health spending is back on the rise. This trend predates Jan. 1, when beneficiaries gained insurance through Obamacare. As a study by the Altarum Institute, which tracks health spending, noted, “acceleration in growth occurred during 2013, prior to [the health care law's] expanded coverage.”

Earlier BEA data showed that health spending grew at a 5.6 percent annually adjusted rate in the last three months of 2013 - which was the fastest pace since 2004. This would be consistent with the prediction that health care spending would return to historical levels as the economy improved, thus undercutting the theory that Obamacare's payment reforms were driving costs down.

As I have cautioned previously, this government data is preliminary and subject to revision. A few quarters of data do not represent a broad enough trend to draw definitive conclusions. CMS lags in reporting the final and most widely-cited national health insurance data. For instance, the 2012 spending numbers didn’t come out until January of this year. So it will be a long time before there will be conclusive information – to the extent that health care data can ever be conclusive.

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