Boomerang Effect: Bending the cost curve … the wrong direction.

Two related articles caught my eye ….

First, Business Insider reported that “spending on healthcare grew an astounding 9.9% in Q1 … the biggest percent change in healthcare spending since 1980”

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The article goes on to say: “Analysts said it’s primarily due to a consumption boost from the implementation of the Affordable Care Act.”

That makes sense.

Some folks rushed to their docs in the last quarter of 2013 to beat the jump in their deductibles and to jump the line ahead those becoming newly insured.

Nonetheless, the fact remains that, adjusted for inflation, America is spending more on healthcare than ever before..

Here’s the big takeaway …

 

“If health-care spending had been unchanged, the headline GDP growth number would have been -1.0%,”

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The second article – by former Administration cheerleader Peter Orszag who coined the “bending the cost curve” mantra – follows through on the theme …

“After growing less than 3 percent in 2011 and 2012, personal expenditures on health care jumped by 6 percent on an annualized basis in the fourth quarter of 2013, and then 10 percent in the first quarter of 2014.

That’s to be expected as health-insurance coverage expands under the Affordable Care Act … People get more health care when they’re insured than when they’re not. “

But, Orszag says not to worry.

Why?

Because “employment in health care hasn’t grown rapidly, as it would if health-care companies expected an end to the era of slow growth. The jobs report for April released on showed that job growth in the sector remains low, with particular weakness among hospitals.”

Think about all that for a moment …

GDP growth is flat (down), except for health care spending … which is surging.

The 6-month surge in healthcare spending has prompted added hiring by healthcare companies.

Suggesting that either (a) the spending surge is transient, or (2) take a number to see the doctor … and, don’t hold your breath.

Place your bets.

Either way, what’s up (or down) with GDP?

#HomaFiles

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