Will Obamacare reverse the Decline in the Growth Rate of Health Care Spending?

Posted by PITHOCRATES - February 17th, 2013

Week in Review

Believe it or not the rate of health care spending has been falling since 2002.  Thanks to the innovation of free markets (see Health Care Cost Inflation Is Slowing, But Obamacare Could Change That by James Pethokoukis, American Enterprise Institute, posted 2/16/2013 on Business Insider).

The rate of health care spending has been falling since 2002. AEI’s J.D. Kleinke points to some factors which are likely responsible: a) lots of breakthrough drugs from the 1980s and 1990s became widely available in generic form in the 2000s; b) health insurance plans became more diverse, giving consumers more choice, such as health savings accounts; c) the IT and networking revolution has improved disease management.

To sum up: Innovation — both in technology and products and processes — has slowed the rise in health care costs. Is the ACA and its expanded government intrusion into the sector likely to sustain and accelerate innovation or retard it?

Hmmm, does more government intrusion accelerate or retard innovation.  The U.S. Postal Service is going broke.  But UPS, FedEx, DHL, etc., aren’t.  People hate going to the Department of Motor Vehicles to renew their driver’s license as it can take an hour or more.  But you can go into a crowded Starbucks and leave 10 minutes later with a custom-made espresso-based drink.  While having enjoyed pleasant conversation with the baristas while you waited those 10 minutes.  Health savings accounts are bringing down health care costs in the private sector.  While Medicare is headed for bankruptcy.  People are saving for their retirement using things like 401(k)s.  While Social Security is headed for bankruptcy.  Hmmm.

Clearly the innovation is in the private sector.  As it appears the less government intrudes the better and more enjoyable things are.  So Obamacare will NOT sustain or accelerate innovation.  But retard it instead.



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