Tags: healthcare | spending | Obamacare | costs

Obamacare Bending Cost Curve in Wrong Direction

Friday, 02 May 2014 02:08 PM

By Megan McArdle

The good news about healthcare expenditures is that they're propping up gross domestic product: Without soaring expenditure on healthcare, this week's lackluster GDP estimates would have been negative, instead of a paltry 0.1 percent.

The bad news about healthcare expenditures is that they're, well, soaring:

Spending grew 9.9 percent in the first quarter, the highest rate in decades. That follows a 5.6 percent increase at the end of last year.

The big increase was driven by the Affordable Care Act's coverage expansion. Expect to see robust growth again next quarter, as the March surge in enrollment translates into an April-through-June surge in healthcare consumption.

Of course, it's not necessarily bad that we're spending more on healthcare. As I've often noted, even though people complain about spending growth, we're a really rich country. People like being able to go to the doctor, and now they can do more of that. And Obamacare was projected to increase the growth rate of spending this year.

On the other hand, spending wasn't projected to grow this much. And last quarter's figures weren't about coverage expansion, because that hadn't kicked in yet. Last quarter's figures were about good, old-fashioned increases in spending per beneficiary.

After all the speculation that Obamacare might be bending the cost curve, we now know that so far, it isn't. That doesn't mean expanding coverage was a bad idea, of course. It just hasn't turned out to be as cheap as some were hoping.

Megan McArdle is a Bloomberg View columnist who writes on economics, business and public policy.

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