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The economy tamed health-care costs. That's ending.

For decades, public and private health-care spending have grown significantly faster than the economy as a whole, a phenomenon known as excess-cost growth.

By Karl W. Smith | Updated on January 11, 2018

Paul Krugman tweeted the following about health care last week: 

The point is significant. For decades, public and private health-care spending have grown significantly faster than the economy as a whole, a phenomenon known as excess-cost growth. Krugman’s tweet and a chart he attached from the Kaiser Family Foundation both suggest that excess-cost growth has ended. If this is the case, then fear of a looming Medicare crisis is overblown, and Republican enthusiasm for cuts in Social Security, Medicaid and Medicare is misplaced on two counts.

First, there’s no reason to panic even if entitlement spending contributes to federal deficit growth; concerns about the deficit are not only exaggerated, but at least in the short term, actively harmful. Chronic slow economic growth implies that the U.S. needs bigger deficits, not smaller ones.

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