By Uwe E. Reinhardt
The New York Times, January 20, 2012
“Growth in U.S. health spending remains slow in 2010” was the headline of a news release on Jan. 9 by the Centers for Medicare and Medicaid Services, part of the Department of Health and Human Services. At an increase of 3.9 percent over national health spending in 2009, “the rates of health spending growth in 2009 and 2010 marked the lowest rate in the 51-year history of the National Health Expenditure Accounts,” the release said.
The $64,000 question is how soon the excess growth of health spending will descend from its historical average of 1.5 to 2.5 percent first to, say, 1 percent or so, and eventually to 0 percent.
It is tempting to view the relatively lower cost growth in recent years as a first step in that direction. But nothing in the history of health spending in the United States suggests that this is the time to break out the Champagne to celebrate that victory.
After all, low rates of spending increases in 2009-10 could just be the lagged effect of the deep recession in 2008-9. There is evidence in the literature that health spending does not completely march to its own drummer, regardless of what happens in the rest of the economy, but instead tends to rise and fall somewhat with the rest of the G.D.P., albeit with a lag of one to two years. The safest bet is that on the long road to eventual zero excess growth in health spending, we will ride up and down quite a few more times on the health-spending roller coaster.
Now why is it reasonable to assume that excess cost growth will just have to decline to zero in the long run – that is, to assume that health spending will not eventually grow faster than G.D.P. and perhaps even more slowly?
Economists would explain such a trend as follows: as the fraction of G.D.P. devoted to health care increases, the added satisfaction, or utility, that people derive from added health care is likely to diminish relative to the added satisfaction derived from consuming more of other things. It could explain a gradual decline in the excess growth of health care spending.
Finally, economists retreat here to the one law on which they all agree, namely, Stein’s Law, named for the late economist Herbert Stein: “If something cannot go on forever, it will stop.” Trust us. It will, in the long run.
http://economix.blogs.nytimes.com/2012/01/20/is-u-s-health-spending-finally-under-control/
Published Comment:
Don McCanne
San Juan Capistrano, CA
How close we already are to meeting the limits of Stein’s Law is exemplified by 1) the current cost of health care for a family of four with an employer-sponsored PPO – $19,393 (Milliman), and 2) median household income – $49,445 (2010).
Although these are not measures of identical family units, they do provide enough of a perspective to show that we have run out of space in family budgets to pay for health care. The forgoing of wages to pay for employer-sponsored health benefits has crimped family budgets to the extent that frugality has become, by necessity, the norm.
We can continue as we are, allowing personal hardship to increase, or we can have our public stewards take control, as they have in other nations. They have been successful in ensuring that everyone has health care at costs averaging only half of those in the U.S.
A properly designed Medicare for all would work just fine for all of us.