Weak World Economy, Not ObamaCare, Is Bending The Cost Curve

Obama’s central planners are latching on to what they think is a rare  ObamaCare “win.” Harvard professor and ObamaCare guru, David Cutler (The health-care law’s success story: Slowing down medical costs) proclaims that ObamaCare has “bent the health care cost curve down” as a consequence of  measures already in effect, such as “value based reimbursements” and “Accountable Care Organizations.”  ObamaCare has thus attained one of its main goals before it even begins. Quite an accomplishment, I must say, if true. Note that Cutler rules out that the downward bending cost curve is a result of the 2008-9 world recession and the spindly recovery thereafter. As he writes: “Even as coverage efforts are sputtering, success on the cost front is becoming more noticeable. Since 2010, the average rate of health-care cost increases has been less than half the average in the prior 40 years. The first wave of the cost slowdown emerged just after the recession and was attributed to the economic hangover. [Wrong. The slowdown began during the recession]. Three years later, the economy is growing, and costs [No. He means the growth rate of costs] show no sign of rising. Something deeper is at work.” Sounds too good to be true. With some minor jiggling, Obama’s central planners have somehow slowed the rise in health care costs for the first time in forty years. Per Cutler: “The Affordable Care Act is a key to the underlying change.” Cutler fails to mention the world-wide phenomenon of slowing healthcare costs caused by the world recession and the weak recovery in its aftermath. The U.S. medical cost slowdown has nothing to do with the ObamaCare tweaks that Cutler praises. Cutler would have us believe that the somnambulant world economy explains the deceleration of medical costs in all countries except the United States, where ObamaCare must be credited. Try selling that one on the streets. The empirical evidence of world-wide attenuating cost increases is overwhelming. Health care costs rose at an average rate of 5 percent per annum between 2000 and 2009 in 32 OECD countries (See OECD official statistics), with U.S. costs rising at the same rate. Since 2009, the average OECD growth rate has fallen to only a half  percent with U.S. health care costs growing at 2.2 percent. Cutler uses the U.S. statistic to boast that U.S. health care costs grew at half their historical rate after 2009. But other countries grew at one tenth their historical rate after 2009, and they had no ObamaCare. Maybe our cost curve would have bent down even more without the Affordable Care Act! That argument is just as plausible as Cutler’s. The American Left laments that Obama and his Congressional allies lacked the courage  to go directly to the holy grail: A European-style single payer (e.g. socialist) system. Why waste time with complicated private insurance exchanges, they ask? Just put everyone in Medicare or Medicaid and let the federal government pay all the bills! (They do not mention the huge payroll or sales tax increases required, but never mind).  With the state paying for everything, the central planners will make sure we have the right health care for all. Do not worry. We’ll take care of everything. Even with ObamaCare, the U.S. remains the only affluent nation in which the state pays less than half of health care costs (OECD Financing of Health Care). In most European countries, the state covers more than three quarters  – in effect a single payer system. Europe and the U.S. had roughly equal economic downturns in 2009, followed by weak recoveries thereafter. In 2012 and 2013, the U.S. continued to amble forwards at a snail’s pace, while Europe remained stuck in the mud. Taken as a whole, the U.S. recovery has been better than Europe’s, especially after 2011, but it is nothing to write home about. From 2000 to 2009, health care spending rose at the same rates in Europe and the United States. (I guess greedy European physicians, hospitals, and other providers can also extort higher fees out of a single payer). With the collapse of its public finances starting in 2009, however, Europe’s single payers actually reduced healthcare spending on average (in absolute value, mind you, not its rate of growth), while spending continued to grow, albeit more slowly, in the U.S. with its mixed payer system. Post 2009 Europe illustrates the risks of a socialist medical care system. During economic downturns, the state’s public finances deteriorate, and health care competes for its share of dwindling public resources against other claimants who may have superior political clout.  In the health care debate, most recognize that costs of medical care rise as we bring on line new technologies, blockbuster drugs, and new operating procedures. If the state cannot gather resources for more health care spending, the health care delivery system itself is threatened. The extreme collapse of public finances in Greece, Ireland, and Iceland after 2009 resulted in 15 to 30 percent cumulative reductions in health care spending --  cuts large enough to threaten public health and order. In a private system, families decide what to keep and what to cut. In a single-payer system, central planners decide, using one-size-fits-all rules. When it comes to health care, would you like to have Katherine Sibelius or Barack Obama as your last resort? Not I, for one.

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