Monday, November 25, 2013

When economists sell their soul

Harvard economist David Cutler, who ought to be hiding his head in shame at being one of President Obama's health care advisors, has demonstrated how unsound one's analytical skills can become once one's brain has been ravaged by Potomac fever.  In a Washington Post Op-Ed he declared that the president's claim that Obamacare would reduce health care costs by $2,500 per family of four has turned out to be true.  The basis of his argument is that the projected path of future health care spending has been adjusted downward:
Between early 2009 and now, the Office of the Actuaries at the Centers for Medicare & Medicaid Services has lowered its forecast of medical spending in 2016 by 1 percentage point of GDP. In dollar terms, this is $2,500 for a family of four.
Unfortunately for Cutler and his reputation, the Office of the Actuaries at the Centers for Medicare & Medicaid Services outlined the sources of the change in its projections, and Obamacare was decidedly not one of them.  Charles Blahaus has a detailed analysis, which includes a summary of the sources of the changes in health spending projections:
1) Medicare/Medicaid/other programs “unrelated to the ACA” (50.7% of improvement).
2) Other factors “unrelated to the ACA” (26.1%).
3) Updated data on historical spending growth (21.8%).
4) Updated macroeconomic assumptions (6.1%).