Ex-Moneyboxer Annie Lowrey has a great piece in the New York Times about the sharp slowdown in the rate of health care spending increases, the potential impact of that on long-term budget balance, and the considerable uncertainty as to whether it makes sense to project the trend into the future. There's a lot of nuance to this, but the chart I have above is a data point that I think belongs in this discussion, even though you rarely hear about it.
It's a chart of construction spending in the health care sector. And I think it's an important indicator, not because health care construction spending is such a big deal on its own, but because it's the closest thing we have to a real-time forecast of what the future is going to look like. Spending money on health care construction projects today is an investment in the idea that health care spending volumes will be higher in five and ten years. The fact that we're in an era of construction spending that's flat in nominal terms (and thus declining in inflation-adjusted per capita terms) suggests pessimism on the part of health care providers about the idea that spending volumes will explode. What's unfortunate is that the data series only goes back about ten years, so we can't put this construction bust in any kind of historical context. Absent that context, it's at least possible that health care construction has historically been a super-cyclical boom-and-bust industry, and my chart here is totally meaningless. But I think it counts as evidence of a real market anticipation that the future of health care will not involve a continual upward spiral in spending.
Perhaps related, we all recall when IBM built a supercomputer named Watson that could win at Jeopardy! Well, Watson is now being used by health care providers as a resource for medical advice: "Over the past two years, IBM’s researchers have shrunk Watson from the size of a master bedroom to a pizza-box-sized server that can fit in any data center. And they improved its processing speed by 240 percent."
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