Every year at the NTA Annual Meeting, we have two "General Session" lunches, usually with hundreds of people in the audience, with an invited speaker to give a talk. One problem you face, as a Program Chair, is that lots of the people you might have considered inviting already did an NTA lunch recently. Great minds (in this case, past and current program chairs) think alike, and thus the pool of prospects keeps thinning unless the replenishment rate can keep pace. I am not sure that it does.
Nonetheless, this year we we were able to do pretty well. Thursday's lunch featured Peter Orszag, and Friday's Raj Chetty. Each had substance and broad interest (if not that many jokes), so I felt good from the standpoint of an organizer who has attended mostly good NTA lunches but also a couple that were less successful and/or substantive.
Orszag gave a talk about where healthcare in the U.S. appears to be headed - a matter of huge interest for U.S. federal budgetary purposes, not to mention otherwise as well. He offered good news for everyone except for the people (and there are many of them in budgetary politics) who prefer bad news. Time will tell if he is right or not, but the viewpoint certainly ought to be more widely known.
Here, for starters, is the part that's absolutely clear. The rate of growth in annual per capital healthcare expenditure has declined very sharply in the last few years. If this decline in annual growth rate is sustained, then the long-term fiscal picture is much better than people have been assuming for many years. The official estimates still don't assume that it will be sustained, since it still looks a bit like an outlier. But, to assess whether it is a fluke or the new normal, the key question to ask is what's been causing it.
Orszag convincingly rebutted the view that the last few years' economic slowdown is responsible for the reduced growth rate. A key piece of evidence is that healthcare for people on Medicare who are largely insulated from the state of the economy (especially if they have Medigap plans to deal with their copayments) has been slowing like all the rest.
The slowdown is from the quantity services being rendered, not because healthcare prices are no longer rising. Orszag attributes it, admittedly tentatively, to changes in financial incentives for healthcare providers. Medicare is now much less a fee for service system (which encourages rising service intensity). Instead, it tends to base payments on the medical condition, and where not doing so yet is apparently expected by many to start doing it shortly (so they are preparing). This means that the hospital or other provider is the one bearing marginal costs of extra patient care. Similar things are happening, he says, in private healthcare plans.
In effect, he says, there is a transition going on that resembles that in private annuity plans, which switched over the last couple of decades from "defined benefit' (where what you will get at retirement is specified) to "defined contribution" (where the pay-in is specified, and the market determines what it yields). That shifted risk onto the employees. Here, to a degree it's the healthcare providers that are facing the shifted risk, and this in effect makes them insurance companies (on behalf of the consumers) even if they are hospitals or doctor groups. This in turn may have problems of its own, including issues of care being denied or of them mismanaging risk or being forced to band together in huge organizations that have the scale needed for insurance. But it does potentially bend the cost curve, indicating (if Orszag is right, and he admitted that this is merely his speculation at this point) that our long-term fiscal situation under current policy may be far less dire than most people, including me, have been assuming.
Hard to say when the political system will take note of this, even if one is wholly convinced that it's correct. After all, falling budget deficits in the last few years have gone almost completely unnoticed by the general public and also the Washington political class.
Chetty's talk was based on the landmark pension savings study, using Denmark data, that he presented at my colloquium earlier this year and that I am actually writing about (in an article that I had to put on the shelf a couple of months ago, and won't be getting back to for a couple months more at the least). So I won't say anything particular about it here. The subject was taxpayer inattention, and the implications for being defaulted into retirement savings plans versus getting "incentives" (from an income tax standpoint) for greater contributions. As you'd expect from Chetty, sober and fair, no undue claims, and careful noting of all the problems in deciding what to make of the research findings for policymaking purposes.