Health Care Spending Grew Slower Than the Economy in 2012

A blog about business and economics.
Jan. 6 2014 4:25 PM

Health Care Spending Grew Slower Than the Economy in 2012

A new report in Health Affairs says that the health care spending slowdown has led to so much slowing down that health care actually shrunk as a share of the economy in 2012. Jeffrey Young has a whole series of charts and graphs breaking down exactly how the changes have happened and delving into the political debate of the hour—does the Affordable Care Act deserve credit?

Not to be Mr. Scoldypants but this actually strikes me as a not-so-important question. (I think the answer is yes, and you can see it's yes because the slowdown was more pronounced in government programs than in the private sector.) The important question is what impact is the slowdown having on the American population. After all, if the policy goal is simply to decrease national health expenditures, then it's really not very difficult. Randomly throwing people off Medicaid will reduce national health expenditures. For that matter, randomly murdering nursing home patients will reduce national health expenditures. Arbitrary price controls will reduce national health expenditures. There are lots of ways to reduce national health expenditures.

But if you propose most of these things not only will stakeholders object, but they'll offer real reasons. For example, murder is morally wrong and therefore murdering nursing home patients is not an acceptable means of reducing health care spending. Draconian price controls might lead to shortages and rationing of access to care.

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Which is to say that when national health expenditures fall we ought to ask ourselves what's actually happening. If hospitals are getting better at giving patients proper outpatient care so there are fewer readmissions, then that's important news not just because it reflects an Obama administration policy objective but because people are actually getting better medical care. By the same token, if increased cost-sharing is leading patients to avoid wasteful health care consumption, that's good not because it vindicates a conservative talking point but because people are actually spending their money more wisely. On the other hand, if hospitals are refusing to readmit patients who need more care or middle-class people are going without useful medicine due to cost-sharing, then that's bad.

America's health care system is notoriously inefficient so there's lots of room to cut costs by improving efficiency. But the thing to ask about the slowdown is whether it actually reflects that or not.

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

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