Thursday, March 17, 2011

New Healthcare Law Will Not Reduce Medicine's GDP Percent: Fed Res Bank Of Dallas

From Economic Letter—Insights from the Federal Reserve Bank of Dallas, Vol. 6, No. 2, March 2011, "Federal Health Care Law Promises Coverage for All, But at a Price" by Jason Saving:

A final question concerns the extent to which national health expenditures will change as a share of GDP as the health care law takes effect. Reducing the share of GDP devoted to health care was a primary objective of lawmakers.

The legislation isn’t likely to achieve that, according to the most recent projection from the Centers for Medicare and Medicaid Services. Even without considering the fiscal caveats already mentioned, the health care reform law has only a negligible net impact on the size of the health care sector and its growth over time (Chart 5). This is not necessarily “bad,” as one might reasonably expect a high-income country with high-quality upper-end care to spend a great deal on health care. But it does reinforce the point that cost control is unlikely to be the lasting legacy of the law.

Cost of Expanding Coverage
The health care reform law was designed to expand coverage while also controlling costs. The law certainly will provide insurance for millions of currently uninsured Americans. However, it is unlikely to simultaneously “bend the cost curve.” That is the more difficult task left to future policymakers to resolve.
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