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Does ANYONE Really Know Projected Health Care Costs? Nope!

Posted May 28 2013 10:18pm
You sure about that?
According to the White House , the Affordable Care Act (ACA) is obviously responsible for the significant decrease in health care cost inflation over the last three years.
The respected health economist Victor Fuchs , writing in the New England Journal, disagrees .  He points out
1) there is a strong relationship between growth in the U.S. gross domestic product (GDP) and growth in health care spending: for the last 60 years, when one goes up, the other follows suit .  While the prevalence of illness drives the consumption of health care, it turns out that the prevalence of illness plus a rising income is a stronger driver of health care consumption*.

It's far more likely that the lackluster economy has been responsible for the low rate of inflation.

2) Two to three years is not enough time to guage the impact of any single intervention on health care spending. In his NEJM article, Dr. Fuchs presents a graph showing the relationship between a two year period of spending and what follows over the next twenty years.  It turns out it's a very poor predictor .

So, even if the ACA could have an impact, it's far too early to tell.

In the meantime, skeptics like Bob Laszewski, are pointing to richer mandated insurance benefits and are confidently predicting that health care costs are destined to increase .  Former CBO Director Douglas Holtz-Eakin worries young healthy adults won't sign up , which could further fuel health insurance premium increases.

Who to believe?  A partisan White House?  Skeptics who want a return to market-based insurance?  The DMCB's solution is to believe Dr. Fuchs and confidently state it doesn't know which way things are going to go.

*The only exception to the association between GDP and health care costs was during the mid-1990's when managed care had its stranglehold on the delivery system

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