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Orszag Sees No Big Uptick in Health Care Spending

By John Reichard, CQ HealthBeat Editor

June 17, 2014 -- The release of preliminary data earlier this year showing that health care spending surged 9.9 percent during the first quarter was widely interpreted as evidence that the long term slowdown in health care spending was ending. That hasn't turned out to be the case, says former Congressional Budget Office (CBO) Director Peter Orszag.

"Now, we actually have that data," Orszag said in an interview recently posted on the website Vox. "They show from the first quarter of 2014, health care spending only increased by 2.9 percent. That's before taking out inflation; in real terms spending growth was basically zero."

The government said April 30 that health care spending rose 9.9 percent during the first quarter of 2014 as people who gained insurance coverage under the health care overhaul law (PL 111-148, PL 111-152) apparently began using more medical services.

The preliminary estimate was made by the Bureau of Economic Analysis. Obama administration officials cautioned at the time that the main survey the bureau uses to track health care spending for the first quarter wouldn't be available until June, meaning there could still be significant revisions.

Jason Furman, chairman of the Council of Economic Advisers, said then that the preliminary results tracked with expectations as the health law rollout continued. "The sharp increase in estimated utilization appears to have been driven by greater use of health care services by people who gained insurance coverage during the first quarter because of the Affordable Care Act," Furman said.

In the Vox interview Orszag said that comparing the first three months of 2014 to the preceding three months shows that health spending actually declined.

"This survey is the basis for the estimates, but there are other elements, so we'll see what happens with the revisions," he said. "I am absolutely sure that the 9.9 percent annualized growth that was reported with preliminary estimates will be revised down significantly."

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