Health Care Costs: Still Going Up

healthcare reformMy Comments: Many, if not most of us, are sick and tired of the arguments about ObamaCare, the nickname for the PPACA, passed by Congress and essentially OK’d by the Supreme Court. Between you and me it’s here to stay, and yet needs a lot of adjustments to make it realistic and meaningful over time.

What seems to be lost in the discussion is the absolute certainty that before the PPACA, the trend lines involving health care costs per capita were increasing at an unsustainable rate. Without change, they would eventually consume virtually all of anyone’s earned income.

What also seems to be infrequently talked about is the changing demographic where a larger and larger percentage of the population is reaching 65 – 85,  which is where most of us “enjoy” spending so much of our money on health care issues. If you don’t want to die just yet, then you spend money getting stuff fixed. Those on the far right are strongly in favor of this. As am I.

So, yes, health care expenditures are increasing. And they will until such time as enough of us die that the trend line shifts. Then as our children reach ages 65 – 85, the trend line will again shift. What is critical is whether we are able to shift the cost per person expense trend line. No one seems to know yet.

And they probably won’t for some time to come. In spite of everything most politicians say, the PPACA was not intended to create a short term fix. It was intended to put as many people as possible on the rolls of insurance companies, each person spending some of their money rather than having the rest of us pay for all of it.

For example, the language of the PPACA incentivises med school participants to gravitate toward primary care and away from esoteric specialities, where income opportunities are greater. The intent is to help make sure preventive medicine plays a larger role in society. The results of that effort are going to take at least 20 years to be fully recognized. But my children and grandchildren will benefit.

The short term dilemma is that small group, primary care physicians are increasingly burdened with administrative costs, pushing a lot of them to become employees as opposed to entrepreneurs, which in my judgement is counter productive. That’s one of the “fixes” that has to happen but which the House of Representatives considers irrelevant to their larger goal of reversing the whole idea.

With enough Tea Party “patriots”, we can get back on the road to ruin.

Steven Hansen, Global Economic Intersection / Mar. 1, 2014

When I read informed opinion on health care costs going up or going down, I visualize the scenes in the Exorcist (Linda Blair’s head rotating a complete 360 degrees or her pea soup hurling). It really depends on what data set you pull, how you view the data in that data set, or if you are really looking for the truth (and not just trying to “prove” Obamacare is good or bad).

Going back to Professor Krugman’s now infamous statement:
The health exchanges are off to a famously rocky start, but many, though by no means all, of the cost-control measures have already kicked in. Has the curve been bent? The answer, amazingly, is yes. In fact, the slowdown in health costs has been dramatic.

If one is trying to convince you that health care costs are falling, the “go to” place is the health sector data in the Consumer Price Index. Figure 1 – Change in Medical Care Costs – Index (blue line, left axis) and Year-over-Year Change (red line, right axis)
Figure 1 “proves” that the rate of growth of medical care prices have been decelerating – although it also proves health care prices are still rising. One pundit, using the medical care components of the PPI and PCE, argued the opposite:
“Healthcare inflation has begun to accelerate,” wrote Deutsche Bank’s Joe LaVorgna pointing to the new producer price index numbers. “The price of “selected health care industries” rose +0.3% in January following gains of +0.2% in December and +0.3% in November.”

These numbers are likely to have an amplified effect when we get an updated reading on the PCE deflator, the preferred inflation measure of the Federal Reserve.

( for many readers, this discussion of an arcane topic is putting you to sleep. While it is important, I understand that. So here is WHERE YOU NEED TO GO to finish the story along with the rest of the charts. – TK )

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