The Health Care Construction Spending Sloweown

A blog about business and economics.
May 30 2013 11:55 AM

The Health Care Construction Spending Slowdown

fredgraph-1

It's by no means definitive, but the chart above showing private spending on construction related to the health care sector is my favorite datapoint to indicate that the health spending slowdown of the past few years is likely to persist into the future.

The reason isn't that construction spending is such a high portion of where health care dollars go. It's that in just about any industry, expansion and the acquisition of real estate go hand in hand. Almost everything else you spend money on—staff, equipment, etc.—needs a place to go. If investors were anticipating an accelerating pace of health care spending, they'd be increasing their level of spending on building the facilities to service those clients. Instead things are basically flat, even though the single biggest no-brainer prediction one can make is that in 10 years time there'll be more old people around.

Advertisement

And if you try to think like an investor rather than a pundit for a minute, expecting the cost curve to bend makes sense. Perhaps it will bend by magic. Or perhaps it will bend thanks to the non-scorable aspects of the Affordable Care Act that its authors are bullish about. Or perhaps that won't happen, and the IPAB scalpel will be wielded to devastating effect. Or perhaps Republicans are right and the whole thing will be a hideous failure that sweeps Jeb Bush into office at which point he and Paul Ryan start wacking away at federal health care funding.

When DC people think about this, they tend to become very impressed with CBO charts that are based on forecasting that current trends will continue. The CBO draws those charts because the CBO is (rightly) not in the business of making guesstimates about future political dynamics or technological changes. But the scenario in their baseline forecast where the curve doesn't bend and the political system doesn't react to the curve's failure to bend, and so we just pile on more and more and more debt forever isn't actually a prediction about what's going to happen. It's a baseline forecast. I'd love to see an actual prediction. A deep and liquid InTrade account where people bet on what share of GDP they think health care will be in 2025 would be fascinating. But we don't have anything like that. This health care construction spending number is an interesting proxy.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Natasha Lyonne Is Coming to the Live Culture Gabfest. Are You?

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?
Crime

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

Tattoo Parlors Have Become a Great Investment

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
Behold
Oct. 1 2014 6:59 PM EU’s Next Digital Honcho Says Celebs Who Keep Nude Photos in the Cloud Are “Stupid”
  News & Politics
Politics
Oct. 2 2014 11:01 AM It Wasn’t a Secret A 2013 inspector general report detailed all of the Secret Service’s problems. Nobody cared.
  Business
Moneybox
Oct. 2 2014 9:19 AM Alibaba’s Founder on Why His Company Is Killing It in China
  Life
The Vault
Oct. 2 2014 11:07 AM Mapping 1890 Manhattan's Crazy-Quilt of Immigrant Neighborhoods
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 2 2014 10:36 AM How Bad Will Adam Sandler’s Netflix Movies Be?
  Technology
Future Tense
Oct. 2 2014 11:01 AM Surge Pricing Is Not Price Gouging
  Health & Science
Medical Examiner
Oct. 2 2014 9:49 AM In Medicine We Trust Should we worry that so many of the doctors treating Ebola in Africa are missionaries?
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?