There is some debate about how permanent they are. However, the drop seems to be about more than just a slower economy where people have less money and can afford less healthcare services.
"Health care spending growth has famously slowed over the past five years, significantly enough that the Congressional Budget Office recently revised its projections of Medicare and Medicaid spending over the coming decade downward by hundreds of billions of dollars."
"Health care spending growth has famously slowed over the past five years, significantly enough that the Congressional Budget Office recently revised its projections of Medicare and Medicaid spending over the coming decade downward by hundreds of billions of dollars."
"Now, research papers suggests the recent slowdown doesn’t just reflect temporary economic weakness, but also structural shifts in how health care is delivered and financed — possibly attributable to the Affordable Care Act — and thus might be a harbinger of a longer-term trend."
"If they’re right, and the trend continues, it means workers can expect higher wages and the country’s projected medium term deficits are significantly overstated, which in turn suggests lawmakers’ continuing obsession with the current budget deficit, and deficits over the coming decade, are misguided."
"The study by Harvard researchers, featured in the latest edition of Health Affairs, finds, like all studies of this nature, that the recession and weak economy contributed significantly to the spending growth slowdown. Less generous benefits, resulting in higher out-of-pocket costs, accounted for 20 percent of it. Faced with less generous coverage and less disposable income, people consumed fewer health services."
"But the good news is that spending growth also slowed among those whose health benefits haven’t changed, including Medicare patients. And that suggests a more enduring trend."
“Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist — a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country,” the authors write.
Of course, the trouble is that lawmakers in Congress don't seem to be looking now. The Democrats should get on this in the face of all the endless fiscal alarmism and point out that there's even less reason to worry than meets the eye.
Obviously anyone who has the faintest clue about Marco matters knows that any deficit reduction measures should not be short term. Even Rogoff and Reinhart now admit this, though they try to pretend this has always been their consistent view, when their Congressional testimony sure sounded otherwise.
However if this does prove permanent, even the medium term becomes much more ill-conceived. Of course it was always ill-conceived anyway. However, at this point the deficit is already coming down, more than it should with the sequester.
The one big worry however that even Keynesians like Krugman had that at least in the long term, healthcare spending will be a problem may be dissipating. As for the sequester, the savings in healthcare are roughly in the same neighborhood as the the sequester.
"To put it in perspective, that $770 billion is equivalent to about three-quarters of sequestration’s mandatory, indiscriminate spending cuts, which lawmakers have been unable to replace with either more targeted cuts or a mix of cuts and higher taxes. The paper implies that budget deficits will shrink by an amount similar to sequestration even if Congress were to simply rescind it."
This is another good reason for ending the sequester. Overall, shouldn't Congress at least be waiting a few years to see if this drop in healthcare spending is permanent? As we all agree-even R-R-that we don't want deficit cutting in the short term, why not wait a little while so as to better assess the long term?
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