Explaining health care costs, spending in the first quarter

Image via Wordle

Image via Wordle

So health spending is going up. Big time.

But health costs are still growing at historically slow rates.

And the Affordable Care Act gets credit for both – and neither.


Spending and costs aren’t the same thing. Health care costs, including Medicare, have been rising very slowly for several years, way lower than the historical trends. (Although individually we may be paying more, especially if we get insurance at work and our employers are shifting costs to us through higher premiums deductibles and co-pays)

Health spending is what we’re utilizing. Maybe an MRI has only gone from $500 to $505. But if we’re buying 10 MRIs when last year we only bought eight, spending is increasing.

In the years that cost growth slowed, there was a big debate among policymakers, economists and, of course, politicians about what was behind it. Were people spending less on health care because the economy was terrible? Was the health law “bending the curve” with new payment and delivery reforms that began to change incentives? Was the private sector finding ways to restrain costs? Most people would say all of that contributed. The question was how big a role each factor played.

The spending spike – 9.9 percent at an annualized rate in the first quarter of 2014 – was no doubt in part because of the coverage expansion of the ACA. People who didn’t have coverage or didn’t have good coverage now had it – and they went to the doctor. That’s not really in dispute. But when the White House said that had been expected, they weren’t just spinning. They did say that before. They – and some independent economists – expect spending to level off as being covered becomes more of the new normal, and some of the pent up needs are met.

Here are a few good pieces on the recent health cost news by journalists and health policy experts:

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