HC Statistics Health Reform

ACA driving up health care spending?

That is the conclusion reached by John Holahan and Stacey McMorrow in a RWJ Issue Brief. They claim that “recent reports suggest such growth has returned to a more typical level of approximately 5.6 percent in 2014, considerably faster than increases in gross domestic product (GDP).” Positive excess cost growth–defined as the difference between the increase in health care cost and GDP–appears to have returned after a 5 year lull where health spending closely tracked GDP.

What was the cause of this increase?

Whereas in the past most excess cost growth has been blamed on technology adoption, the authors claim that the ACA expansion is mostly to blame. Expanding health insurance coverage clearly increases the utility of patients covered by insurance. Due to moral hazard, however, health insurance increases per capita spending.

The authors find that after removing the effects of the ACA’s expanded insurance coverage expansion, health care spending closely tracks GDP. ACA graph


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