Health Care Spending Is On The Rise, And That’s A Good Thing


New federal data finds that health care spending increased by 9.9 percent in the first quarter of 2014, representing somewhat of a turnaround in the four-year slowdown in health care spending. Some critics are already spinning the news as an indictment of the health care law, pointing out, as Phil Klein does in The Washington Examiner, that health care costs are now spiking at the “fastest rate since 1980.”

But let’s be very clear about what’s happening here: an improving economy is allowing Americans to now spend more on health care, while people who have previously been uninsured are finally getting insurance and are using their care. In the meantime, health care prices are still continuing to grow at low rates, reducing Americans’ health costs.

All of this was fully expected. When the Congressional Budget Office analyzed the Senate’s health care bill in 2009, it found that while spending would increase after the uninsured first obtain health care coverage, “during the decade following the 10-year budget window, the increases and decreases in the federal budgetary commitment to health care stemming from this legislation would roughly balance out, so that there would be no significant change in that commitment.” This month, the office released a report that included a graph showing this trend: a spike of health spending in 2014 and then an evening out, as growth comes down to below what it would have been without enacting reform:

CBO health care chart

The reduction is the result of the cost containment aspects of the health care law, provisions like the Independent Payment Advisory Board (IPAB) — which is required to “recommend changes to the Medicare program to limit the rate of growth in that program’s spending” — the excise tax on so-called Cadillac insurance plans, and other changes in Medicare.

Health care projects are of course fraught with uncertainty and federal officials will have to aggressively implement the cost containment aspects of the ACA if the nation is to really bend the health care cost cure. But ironically, the people who will complain the loudest about the cost projections would also happily repeal the measures that are designed to stabilize the health care cost trend over the long-term.