Okay, there's probably a few of you who don't see any fiscal charts on a typical day. I salute you.
But here, we're obsessed with a question David Wessel tackles in today's Wall Street Journal: is the recent slowing of health care costs cyclical or structural? Or, more likely, how much of each? And does it have anything to do with health care reform? (See here and links therein.)
But first, why am I casting this in fiscal terms -- isn't that the stuff of taxes and transfers and this the stuff of health care affordability? It's because pretty much every discussion about achieving a sustainable budget deficit goes like this: "In the near term, we need tax reform that doesn't just cut spending but also raises new revenues. But after that, it's all about health care spending... if we don't slow its growth, we're toast no matter what we do on the tax side."
In fact, we now spend the same share of GDP on health care -- 18% (and rising) -- than the historical average of federal taxes collected, and half of health care spending is public spending. So that's why I dub this a fiscal discussion.
The top chart (see below) actually shows a steady downward trend in the rate of cost growth, with what might be cyclical humps in there, though it's hard to tell because this is a five-year moving average. The bottom chart clearly shows sectoral slowing over the past few decades, except in hospitals (which represent the largest single component, accounting for about one-third of total health expenditures).
Parsing out what's recessionary and what's likely to stick as the economy climbs back is the question. As one source summarizes it, "This [slowing of health spending] has gone on longer than anyone expected, though the [economic] downturn has too."
David Cutler, a health economist who's been taking the temperature of these trends for a while now, breaks it down like this:
He attributes about a third of the slowdown to the transitory impact of the recession, and another dollop to recent cuts in government payment rates to providers and to the drug industry's inability to find pricey new drugs to replace the revenue from generics.
But Mr. Cutler speculates a significant part of the slowdown reflects changes in consumer and provider behavior that will persist. Americans are using less health care because they are being forced to pay more out of pocket. Indeed, the share of insured workers with deductibles of $1,000 or more rose to 31% in 2011 from 18% in 2008, Kaiser estimates. "A lot of people are saying: Do I really need this?" Mr. Cutler says, who notes a distinct slowing in the pace of spending on CT scans, MRIs and other imaging.
At the same time, he says, doctors and hospitals--prodded by employers and government--are changing the way they deliver health care, partly in anticipation of some features of the Obama law, such as penalties for hospital-caused infections.
Such developments strike me as potentially lasting, and they represent a reasonable mix of individual economic incentives and broader regulation of the sector. But we'll have to see now, won't we?
Final point. I've been remiss of late in writing less about the persistent jobs gap that remains our biggest near-term challenge. I haven't forgotten about it at all, though I'm frustrated by policymakers' inability to do squat to help ameliorate it. I'll get back to it, of course, but in the Zen Buddhist economics I try to practice, it's all connected anyway. So, when nudging the FHFA to get moving on principal reduction, I'm also advocating faster, healthier deleveraging that would ultimately boost consumption and job growth.
And in advocating bending the health care cost curve, I'm thinking a lot about the huge boost this gave to job growth the last time it happened in the mid-1990s. Economic theory, by the way, says that's not supposed to happen, since employer health spending and wages are fungible in the compensation package. But I'm pretty sure the theory's quite wrong about this, especially in the near term.
So, really, I've always got jobs in the back of my mind. Of course, we need less jobs in the mind and more in the labor market.
This post originally appeared at Jared Bernstein's On The Economy blog.
Follow Jared Bernstein on Twitter: www.twitter.com/@econjared
The "per capita" analysis provided herewith sugests that more and more people are doing without at the same time an expanding GDP (a proxy for wealth) is allocated to fewer and fewer. It's the latter than explains the former. In fact, the latter explains a lot of things!
Actual spending as a function of GDP produces a chart of a different color. Readers are invited to google this search string: "File:Health costs USA GDP.gif." As they say, one picture is worth a thousand words.
Until you do these things then wages will continue to stagnate, the 1% will continue to own this nation, and the debt will keep growing.
While controlling the profit/overhead of insurance will help a little- and then just for the relatively healthy young people- the vast majority of the cost is going to care, not insurance.
I like single-payer better for a number of reasons.
Health insurance profit and overhead is a small part of the problem, and in many cases insurance lowers care cost by reducing profit margin and waste in providers by refusing to pay inflated prices.
Oh, and here's that chart for you: http://upload.wikimedia.org/wikipedia/commons/d/dc/Health_costs_USA_GDP.gif
Declining or [Stagnant] wages have reduced the value of the dollar; each one is worth?In the wake of the Global financial crisis of 2008, policymakers and others have called for a new international monetary system that some of them also dub Bretton Woods II. On the other side, this crisis has revived the debate about Bretton Woods II.[Notes 5]
On September 26, 2008, French president, Nicolas Sarkozy, said, "we must rethink the financial system from scratch, as at Bretton Woods.”[23]
On September 24–25, 2009 US President Obama hosted the G20 in Pittsburgh. A realignment of currency exchange rates was proposed. This meeting's policy outcome could be known as the Pittsburgh Agreement of 2009, where deficit nations may devalue their currencies and surplus nations may revalue theirs upward.
This is at least [Grading on a curve]. The lag is always in [Real Valuation]; the idea that in the real world; everyday people have the same; or even similar power in the marketplace as they had is; [extremely misleading].
There's also probably quite a few. Who if simultaneously presented with the temperature record from the end of a fever patience’s bed, couldn’t tell the difference between the two. Although when those lines drop off the bottom, the show is definitely over.
"This [slowing of health spending] has gone on longer than anyone expected, though the [economic] downturn has too."
Might as well go back to Runes then.
"the drug industry's inability to find pricey new drugs to replace the revenue from generics."
Isn’t this a choice between providing everyone with an automobile, to go about their business? Or supplying moon rockets to just a few.
"Zen Buddhist economics"
What is the sound made by one ailing empire imploding?
"faster, healthier deleveraging that would ultimately boost consumption and job growth."
Or we could concentrate on the supply of those vital things we must have. While weaning ourselves off of those things we don’t really need.
The $5,000 pkg: All medical, eyes, dental, 24-hour nurses at home for four months, all drugs, and all medical contraptions from wheelchairs to retrofitting your bathroom, kitchen, and bedroom. In other words, the works.
Same thing in Canada: $99/month.
If the insurance companies can make money there with their private insurance add-ons, what's preventing them here?
We need socialized medical insurance like Canada. (It doesn't have socialized medicine, like England where the docs work for the govt, it has socialized med. insurance.) Sounds like a plan.
I don't believe Canadians are coming to Arizona for health care, they don't have enough money to pay for medical procedures in the USA without having USA insurance. Heck, Americans can't pay for it without insurance, how is it that Canadians are so rich? Is it only millionaires coming here for treatment? I just don't believe your comments.
HOWEVER - there are plenty of Americans going TO CANADA to buy their prescription drugs. How's that work? Because the Canadian government doesn't let these pharmaceutical companies to over charge for prescriptions.
It would probably help some, but not a lot.
That's the bottom line for most of us.
If our annual overall insurance costs/premiums/co-pays/etc
keep going up, or the coverages reduce or get limited,
as happening as long as I can remember,
then these slowing trends do not really help our pocketbooks
where it matter the most.