US

Peter Orszag On The Surprising Decline In Healthcare Inflation That Could Change Everything About US Spending

We recently got the opportunity to interview Peter Orszag (Citi Vice Chair and Obama’s CBO chief). One of the topics we discussed was healthcare spending.

Everyone knows that healthcare spending is the big driver of long-term US spending (and deficits) but as people have been noticing (and as Orszag has written about) healthcare and Medicare spending has been coming in below what people have projected.

The question is: Is this a blip related to the weak economy, or the beginning of a real structural shift?

Orszag offered three reasons why this shift is likely to be real.

1. Medicare is slowing down faster than the commercial space. It would be strange if it Medicare slowed down due to an economic shift, since it’s mostly immune from the economy. Furthermore, you’re seeing a lot of improvement in the high-cost areas, which again is consistent with a structural change, not just a cyclical one.

2. We’re not seeing the biggest slowdown in the states with the worst economy.

3. There are structural things that are changing. The system is digitizing rapidly. There’s less fee-for-service. There’s also more cost sharing between employees and employers.

Here’s the video:

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