People tell me I worry too much. Maybe they are right.
Back in April, I wrote a big article warning that we might be on the verge of another surge in health care spending. As I noted, the money that we spend on medical treatments, goods, and services goes up every year, because we’re living longer, discovering more sophisticated treatments, and so on. Since the 1970s, those expenditures have usually risen much more quickly than national incomes, putting an ever-greater strain on paychecks, corporate treasuries, and the federal budget. A respite had started around 2007 or so, but, by the end of last year, reports were suggesting that the respite was over. Lots of people noticed the same thing.
To critics of the Affordable Care Act, this apparent turn to health expenditure normalcy proved that the law had done little to control costs—and that it would eventually lead to much more spending. But the worrisome reports came with a huge asterisk. They were based on preliminary estimates and a whole lot of guesswork. As economists like David Cutler and Peter Orszag pointed out, other data points were more encouraging. Among other things, the cost of the federal government’s Medicare program was still rising very slowly. That suggested the health care industry really was reinventing itself and becoming more efficient—thanks, at least in part, to incentives that Obamacare had introduced.
It was easy enough to dismiss those claims. Cutler was Obama’s chief health care adviser during the 2008 campaign, while Orszag served as budget director in 2009 and 2010. Now it looks like they were right.
On Wednesday, the U.S. Bureau of Economic Analysis issued new estimates for how the economy and its component parts performed in the first quarter of 2014. The headlines were all about the economy shrinking. But that was expected, as QED’s Danny Vinik pointed out, given some one-time factors. The real surprise was health care. The supposed surge in health care spending was nowhere to be found. On the contrary, relative to the previous quarter, health care spending actually fell by 1.4 percent.
Overall, spending is still more than it was during the first quarter of 2013, which is arguably the most relevant basis for comparison. But it’s rising awfully slowly, which means that all of us have more money to spend on other things. And to the extent spending is rising, it’s mostly because more people are using medical care, not because prices are rising. That could be good news. “We want people to use more services,” Cutler pointed out over e-mail. “That's why we are insuring them.”
This isn’t reason to be complacent. If this episode teaches us anything, it’s not to make hasty conclusions based on early, incomplete data. Costs could rise more quickly in the future, perhaps as soon as the second quarter of 2014—the first period after that huge of surge of last-minute enrollment through the Obamacare exchanges. (See the twitter feed of Larry Levitt, from the Kaiser Family Foundation, for more on this.) Over the long run, a lot depends on whether Congress resists heavy industry lobbying to undo the law's efforts at cost control.
But it sure doesn't look like Obamacare is bankrupting the country, as the critics always said it would. Better still, the law really may be nudging health care in the direction of more efficiency.
I’ll keep worrying, of course. It's the Jewish mother in me. But I'm less anxious than I was a few weeks ago. You should be, too.
AT THE SUPREME COURT: The justices ruled on Wednesday that the police need a warrant to search cell phones. A pleasantly surprised Yishai Schwartz can tell you why it’s such an important win for privacy. Also, the justices also ruled that Aereo, a streaming service that threatened the TV industry, was guilty of copyright violations. Tim Wu says the media industry’s win is the consumer’s loss.
IN THE LOWER COURTS: Within hours, courts struck down same-sex marriage bans in two states, Utah and Indiana. Nearly half of gay Americans now live in a state where they can marry.
This will make you sweat: May was the hottest on record. At Vox, Brad Plumer warns that 2014 or 2015 could end up being the hottest year on record.
This will make you laugh or cry or both: David Dayen, writing for Salon, marvels at the spectacle of liberals and conservatives reversing sides over the Export-Import Bank. (Credit where due: The Cato Institute has remained consistently opposed all along.)
This will make you sad: A new study says kids overwhelmingly prioritize their own achievement and happiness over caring for others—because that’s the message they get from their parents. Emily Bazelon can tell you more at Slate's Double-X.
At QED:Rebecca Leber gives President Obama a to-do list on climate change for the rest of his second term. And don’t miss the first in our “QEDecide” series: Daniel Webster, gun violence expert at Johns Hopkins University, making the case for universal background checks.
Stuff to watch today: At 10 a.m., the Supreme Court issues more rulings. At noon, the U.S. World Cup team plays Germany. Legal reporters, you’d better write quickly.