Is This Time Different for Health Expenditure?

In a new working paper, economists Amitabh Chandra (Harvard), Jonathan Holmes (Harvard), and Jonathan Skinner (Dartmouth) (CHS) examine whether the recent slowdown in the growth of U.S. health expenditure reflects the Great Recession or Obamacare, taking issue with both explanations:

[H]ealth expenditure growth in the depths of the recession was nearly identical to growth prior to the recession. Nor can the Affordable Care Act (ACA) … take credit, since the slowdown began prior to its implementation.

Instead, CHS

… identify three primary causes of the slowdown: the rise in high-deductible insurance plans, state-level efforts to control Medicaid costs, and a general slowdown in the diffusion of new technology, particularly in the Medicare population.

As to whether the slowdown will continue, CHS 

are more pessimistic, and not entirely because a similar (and temporary) slowdown occurred in the early 1990s. The primary determinant of long-term growth is the continued development of expensive technology, and there is little evidence of a permanent slowdown in the technology pipeline.

CHS’s bottom line, therefore, is that

over the next two decades … health care costs will grow at GDP plus 1.2 percent; lower than previous estimates but still on track to cause serious fiscal pain for taxpayers and workers who bear the costs of higher premiums.