Opinion and Economic Analysis

Hicks: We'll spend more and more on health care

September 28, 2013

Oct. 1 marks an important milestone in the Affordable Care Act’s implementation.

Like most Americans, I am dismayed at our combination market and system for the delivery of health care. I am only glad that insurance companies, regional hospitals, 30 federal agencies, hundreds of state agencies, the American Medical Association and my employer are not responsible for insuring that dinner arrives at my table tonight. It would be cold, late and expensive.

Like most Americans, I am confused by the ACA. I don’t have a spare couple of months to read it in its entirety, but am certain there are things about it I will like and some I will detest.

On balance, though, it is increasingly clear that it will require Herculean fixes. I say this because the ACA increasingly appears to have adverse short-term labor-market effects.

Had the economy more fully recovered by now, it would not be so severe. However, should the ACA be repealed, I do not believe we would see a resurgent economy.

To be sure, the blame for the shocking growth of part-time work over the last year falls squarely upon the ACA, but there are many other policy choices that hold back the economy.

Moreover, as bad as the ACA is in limiting employment growth in the short run, it is not at all clear to me that this problem will persist. In fact, if we could just get away from employer-based health insurance, it seems likely labor markets would improve.

Additionally, much of what is driving the health care cost debate is mistaken. Health care costs are not really rising.

As we become richer, we spend a greater share of our earnings on health care. Today, it sits at 18 percent, but could well grow to 50 percent by the end of the century.

At the same time, a heart bypass is cheaper than it was 30 years ago and far more expensive now than it will be in 2050.

The cost of providing a specific health care service is declining, but we are spending more and more money on new tests and procedures. Health care behaves exactly like our entertainment budget, except that our employers pay a big part of the tab. To a business it is a cost, pure and simple.

When we again re-examine health care in a comprehensive way, we must face the fact that the ACA did nothing to cut health care spending. It couldn’t possibly have done so against the ever-growing desire to live longer and better.

That was its problem all along.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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