The drop in healthcare spending matters

Doctor Andy Chiou debrides a leg wound on patient Larry Kirk in Peoria, Illinois, November 26, 2013.
Doctor Andy Chiou debrides a leg wound on patient Larry Kirk in Peoria, Illinois, November 26, 2013.
On Jan. 6, 2011, House Budget Committee Chairman Paul Ryan (R-Wis.) said of the Affordable Care Act, "Unless repealed, this law will exacerbate the spiraling cost of health care."
On Jan. 6, 2014, we were reminded that's not quite what happened.

New data released [Monday] by the Office of the Actuary at the Centers for Medicare & Medicaid Services today shows that national health expenditures grew by just 3.7 percent in 2012. That means that the years 2009 to 2012 saw the slowest growth in U.S. health care expenditures since the government started collecting this information in the 1960s.  This slow growth coupled with the rebound in the economy resulted in health spending as a share of gross domestic product (GDP) declining to 17.2 percent, the third consecutive year that health spending has held steady or declined as a share of the economy. Stated simply, health spending stabilized over the past four years so it no longer took an increasing bite out of the economy.

It's a pleasant surprise -- health care spending hasn't shrunk as a percentage of GDP since Clinton was president, and hasn't shown slow growth like this since Eisenhower was president.
The tricky part, however, is understanding why. For the White House, the Affordable Care Act deserves much of the credit and the administration can make a credible case to bolster the argument.
And you better believe that if the data pointed in the opposite direction, the right would scream bloody murder and blame "Obamcare" for the discouraging results.
But as Jonathan Cohn explained, there's more than one factor driving the figures, including the effects of the recession and one-time savings associated with prescription-drug patents. But "Obamacare" still deserves to be in the mix.

Among the most optimistic about these signs is David Cutler, the Harvard economist and former adivsor to President Obama who has written on the subject extensively. "The continued slowness in cost increases, even several years after economic growth has resumed, indicates quite strongly that the health care cost curve is bending," Cutler says. [...] If you cover health care and talk to people in the industry, it's obvious that the law's incentives are having a major effect. Hospitals in particular are reengineering themselves to focus on safety, to make sure providers communicate with each other, and to improve follow-up care after patients are discharged. These changes are happening quickly -- more quickly than many of us expected.

There's no shortage of questions about what's likely to happen next, but for now, the trends are clearly encouraging and ACA backers have reason to smile.