By mid afternoon after serious economists had time to drill down on the data two narratives emerged. Economist Casey Mulligan of the University of Chicago gave credit where credit is due. He cited the implicit taxes in Obamacare as the cause. By implicit taxes Casey means the added cost of health insurance premiums caused by the mandates to buy coverage the insured would not normally purchase. For example, single men and older women usually do not bother to insure against the risk of pregnancy.
Josh Ernst, the greatest White House press secretary since Jay Carney, found the true culprit and guess what? It was good news! Health care spending dropped by its largest percentage in 32 years. It had fallen sharply in 2009 in the depths of the recession but this time when millions of Americans were now covered by Obamacare health care providers had become so much more efficient that costs were falling. Hats off to Kate Sebelius! Vox, the general interest news site for the 21st century agrees completely.
"But it's hard not to be optimistic..."It certainly has been good news up through the end of 2013," Roehrig said. "These other underlying indicators of health care — prices and employment — in the first quarter, they stayed low. In the big picture, the news is good."Yes, break out the champaign! If one accepts the notion that the obvious answer is usually the correct answer Obamacare is in deep trouble. Mulligan is correct in that the implicit ( and explicit ) taxes in Obamacare are a drag on the economy but moving from macro to the microeconomics what factor most determines a consumer's decision to purchase a good or service? Price. And the huge, pay up front, deductibles found in all but the most expensive insurance plans sold on the Obamacare exchanges may be pricing the insured out of the market. They are insurance poor. Some will argue that the demand for health services is inelastic and that the sick will pay any price for wellness. Then they should explain why health care spending declined during the 2009 recession. Elective and minor surgeries are postponed, flu and common colds are treated with aspirin and endured and costly prescriptions are substituted with over the counter medications.
Aside from cost another complaint about the new policies is narrow networks. No one yet knows of the bottle necks that may be developing in some areas of the country. How many pediatricians are in the network? Ophthalmologists? Urologists? Is this health care rationing VA style?
It could be Josh Ernst is right and I am wrong but what efficiencies could have developed so quickly? In any event the economy must grow by 2.9% this quarter just to break even and that would mean a 5.8% quarter to quarter increase. Democrats should be very nervous.