December 15, 2014
Robert Samuelson discusses the slowdown in health care costs in his column today and considers possible explanations. He notes a study from Kaiser Family Foundation which attributes three quarters of the slowdown to the weak economy. This study predicted that spending would accelerate in 2014.
We actually have data on this, since the Bureau of Economic Analysis reports spending through October (Table 2.4.5U, Line 168). Through the first 10 months of 2014 we are on track to see a 3.3 percent increase in spending compared to 2013, down slightly from the 3.5 percent increase last year. (This category accounts for about 70 percent of total spending.) That would suggest that 2014 is not fitting the pattern predicted by the Kaiser analysis, which should raise doubts about the extent to which a weak economy can explain a reduction in spending.
Samuelson also touts the growth of health savings accounts (HSA) as a major factor in reducing costs. He cites data from Kaiser that HSAs went from 4 percent of covered workers in 2006 to 20 percent in 2013.
It is implausible that this growth could explain much of the reduction in costs. Almost by definition the people who sign up for HSAs are people with low expenses. (It doesn’t make sense to sign up for an HSA if you anticipate that your bills will exceed the deductible.) The additional 16 percentage points of non-senior individuals who signed up for HSAs almost certainly accounted for only 2-3 percent of total health care spending. This means that even a reduction of 1.0 percentage point of national spending (reducing the growth rate by 0.15 percentage points over the last seven years) would have required a massive reduction in health care spending by these people.
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