Re: Health Costs and the Budget

by Avik Roy

Yuval has a fine post below detailing the flaws with the latest progressive narrative about fiscal policy: that growth in government health-care spending is slowing down, and, therefore, that entitlement reform is no longer necessary. The more aggressive advocates of this narrative, such as HHS secretary Kathleen Sebelius, double down by arguing that Obamacare is responsible for the slowdown.

Here is a chart I put together for a recent talk at Yale Medical School, in which I compared growth in U.S. health spending, growth in Medicare spending, growth in Medicare per-enrollee spending (because the retirement of the Baby Boomers is leading to a rise in enrollment), and growth in spending across the industrialized OECD countries.

What you’ll notice in the chart is that growth in spending across the industrialized world has come down significantly in the last several years, as represented by the black line. Indeed, in 2010 and 2011, growth in U.S. spending — whether you look at overall spending or just Medicare — is higher than the OECD average.

The bottom line: The most likely explanation of recent trends in health spending is that they are a reflection of economic conditions in the developed world. Other factors may play a role, but we certainly can’t be sure.

— Avik Roy is a columnist at NRO. You can follow him on Twitter at @avik.

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