Asymmetrical Information - Megan McArdle
09.25.12 6:05 PM ET
Health Care Cost Growth Speeds Back Up
While I was on leave, there was sporadic discussion of the fact that health care spending growth seems to have moderated quite a bit over the last few years. I saw some boosters claiming this as a victory for ObamaCare: providers, they claimed, were moderating costs ahead of the hammer coming down.
This is a variant on Bob Rubin's claim that Bill Clinton's deficit reduction had such a powerful influence on the debt markets that bond prices started dropping even before they'd, y'know, proposed a deficit reduction bill. That struck me as extraordinarily unlikely, and so did the later variant. Normally, what I see when the government is about to impose some kind of control or regulation is not companies rushing to comply before they have to. Rather, they tend to go all out to get some while the getting is good. But I was not blogging, and so I did not express this opinion to anyone except my long-suffering husband, who spent six months listening to blog posts delivered verbally. So you'll have to take my word for it that I was skeptical. Or not, as the case may be.
Skepticism seems to have been well-deserved; health care costs seem to be marching back upwards. This gives credance to a theory that I find rather more parsimonious: in deep recessions, people are more price sensitive--especially with the proliferation of high-deductible plans. As the economy has recovered, however haltingly, so has the growth of health care costs.
Indeed, before this data came out, I had a somber conversation with an economist of my acquaintance about what health care cost moderation might mean. If Obamacare's boosters were right, it would mean more money to spend on other things--at least, for those of us who are not doctors or nurses. But if they were wrong, and the moderation in cost growth indeed resulted from the economic slowdown, any long term moderation in cost growth would also be accompanied by long-term moderation in economic growth--a cure worse than the disease. Health care costs that grow at 3% when the economy is growing at 1% are not better than health care costs growing at 5% when the economy is growing at 3%. They are much, much worse.