Correlation does not equal causation

The indomitable John McDonough asks who is right – does ObamaCare cost money or does it bend the cost curve down?  One thing I would like to highlight is this, from a NY Times article (internal citations omitted):

One sign that the slowdown might be lasting is that it seems to have started before the recession took hold and is continuing even as the economy picks up. ‘The more we look at the data, the more it seems to me that the cost curve did bend before the recession,’ said Charles Roehrig of the Altarum Institute, a health care research organization. Additionally, health spending did not seem to decline or slow down more in states that were hit harder by the economic downturn, and it has flattened for Medicare patients, even though they tend to be sheltered from the effects of economic fluctuations.”

(Emphasis mine.) The recession started in 2007.  ObamaCare was passed in mid-2010 and does not take full effect until 2014.  It is entirely possible that ObamaCare could be driving up costs amid a slowdown in health care spending – i.e. the reduced spending (from other causes) is balanced out by increased spending for ObamaCare.

This is related to the way that you can cut permitting for drilling on federal lands but have gas prices drop: increased gas production in other areas temporarily offsets decreases in that particular area, although those decreases in production will increase costs over what they would otherwise be.  To analogise to one’s personal finances, you could save money by clipping coupons for groceries, but go to Starbucks for your morning lattes instead of making them at home.  Obviously, buying your lattes will cost you more money than making coffee at home, and obviously, you are saving money every week by clipping coupons to buy detergent, corn chips, and frozen meals.  But you wouldn’t say that buying Starbucks saves you money over making lattes at home – but this is exactly what Obama does.

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Filed under Economics, ObamaCare

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