ObamaCare really behind slower grow in health care spending?

Former WH economic adviser Austan Goolsbee weighs in


This is a rush transcript from "Your World," January 7, 2014. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Well, here's to your health, because you might be fed up with this law, but did you know that overall spending on health care is slowing because of this law?

The White House wasting little time crowing about a trend it says is sticking largely because health costs are declining, as recently as 2012, when such spending grew less than 4 percent, a marked decline from prior years.

Now, Democrats are crediting ObamaCare and its expected savings. Republicans credit an anemic recovery and its unexpected consequences.

Former Obama White House economic honcho Austan Goolsbee no doubt sides with those Republicans. He joins us now.

Austan, happy New Year. Good to have you.


CAVUTO: Do you think the Affordable Care Act is behind this?

GOOLSBEE: I think it's at least partly behind it.

I mean, there are certain specifics that it would be hard to argue it wasn't behind. So the Affordable Care Act changed the Medicare payments, so that if you get readmission to the hospital for certain kinds of infections that shouldn't have occurred the first time, they stop paying for readmissions. And you see a 40 percent decline in the incidence of those hospital readmissions, which are very expensive.

I think there are a number of specific things...


CAVUTO: Well, that's assuming those infections didn't recur again and these people didn't die. I'm kidding here.


CAVUTO: But I wonder what -- wouldn't it really be the result...

GOOLSBEE: Well, look, you're...


CAVUTO: ... of a slowdown, though? I mean, this comes on the heels of after the great meltdown and everything else and we were still pretty rocky, and -- and in that environment, there really wasn't much price latitude.

GOOLSBEE: Well, that's kind of the -- the great alternative explanation.

But I think the two things that we have seen over the last two years is the economy began to improve again, but you didn't see the health care costs kick back up. And, two, you saw the same thing happening in things like Medicare, where the people are retired, so the joblessness issue ought to have no effect.

CAVUTO: Then how does that account for simple -- simple things like people's deductibles going up and then there was the more strict supervision of premiums and all of that, that a lot of people just paid more up front and it wasn't reflected here, higher deductibles, you add it all up, take some very popular medications like Lipitor and Plavix off patent, and, you know, there you go.

GOOLSBEE: Went off their patent. I think some of those -- the best accounting that I have seen for it is probably 25 to 30 percent came from the economy slowing down, maybe 25 to 30 percent came from some of these other let's call them one-off factors.

And it -- but there's still maybe 50 percent to be explained that could be attributed or at least be influenced by the ACA.


CAVUTO: Oh, come on, Austan, 50 percent? Half of this you're crediting to the health care law that hadn't really gone into effect?

GOOLSBEE: No, I'm saying that's the most it could be.

CAVUTO: Yes. Come on.

GOOLSBEE: I'm saying that's the most it could be.

CAVUTO: I just think they might be seeing -- you might be right. There's no way to question -- some of these other factors notwithstanding.

But I think the reason why many are crowing about this -- and, look, a slowdown in -- in health care costs is always welcome. I don't care what side you're on. But I think we have got to recognize the obvious for the slowdown it largely reflected and also get a handle on a law that is not very popular.

So I see this folks who like it seizing on this as -- as proof that it's well worth the cost.

GOOLSBEE: Well, they shouldn't get too -- nobody should get too hyped up about any one-year or two -year effect, when you know stuff can change.

At the end of the '90s, as you know, we started getting way more tax revenue than anyone thought, and people started making projections about we are going to have multitrillion-dollar surpluses, and those didn't end up being true.

So, you -- they -- I certainly agree they don't want to get way ahead of it. But I will say the fact that you see these slowdowns in price inflation occurring in Medicare, which is much less affected by the state of the economy, makes me think the general economy is not the main thing driving this.

CAVUTO: You mentioned the Medicaid thing and those who had to be readmitted for infections and the rest. There is a fear here that -- that -- that a lot of this, because of the new law, is going to limit that type of activity, period, and a lot of people are going to get sicker. Do you buy that?

GOOLSBEE: Look, it's always the -- that is the conundrum of, are price increases actually inflation or is it that people are actually getting better stuff and better stuff costs more?

Now, some component of this -- I'm not meaning to make light. You identified what is most likely a major driver of this limiting of the growth rate of health care costs...

CAVUTO: Right.

GOOLSBEE: ... which is the private sector has been, for 25 years, saying, wow, these costs are killing us. We got to find ways to reduce these costs, so higher deductibles, higher out-of-pocket expenses, stuff like that.

And always the fear is, if you pursue that, people might not get the kind of preventive care they need. They might say, oh, I'm sick. I'm not that sick.


CAVUTO: But I'm just wondering whether these higher deductibles and whether these higher premiums that a lot of folks are seeing or switching into policies that are a lot more limited or a lot more expensive are going to show up and in future health care costs trends and actually wipe whatever gains we're seeing away.

GOOLSBEE: It might.

If it did, that would be -- that would obviously be a big negative. I don't think the magnitude of that, though -- the direction may be there, but I don't think the magnitude can -- can outdo this. This was really -- over the last two to three years, this has been the slowest growth rate of health care costs in a half-century.

CAVUTO: Right.

GOOLSBEE: So, I think it's pretty dramatic, what we're seeing. We're now trying to process through who is -- who is -- who gets the credit, but it's still a great development.

CAVUTO: We will watch very closely.

Austan, it's always good seeing you. Thank you.

GOOLSBEE: Nice to see you again.

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