ECONOMIC REPORT OF THE PRESIDENT

in states experiencing weaker and stronger economic performance at a
given point in time has generally concluded that, to the extent economic
downturns affect health care spending growth at all, those effects fade almost
completely within a few years (Chandra, Holmes, and Skinner 2013; Sheiner
2014). Because the labor market reached its trough by early 2010 and has
recovered steadily since then, as illustrated in Figure 4-36, this evidence
would suggest that the recession can play only a limited role in explaining
why private health care spending growth has been so slow during the post-
ACA period, particularly over the last few years.
One potential shortcoming of using cross-state comparisons to estimate
the relationship between macroeconomic conditions and private health
insurance spending is that these types of analyses cannot capture effects of
economic downturns that operate at the national level, rather than state or
local level. It is possible that these types of national effects might persist for
a longer period of time. In an effort to capture these national effects, some
researchers have examined the correlation between economic growth and
growth in private health insurance spending at the national level over time.
Taken at face value, results from these “time series” analyses suggest
that economic growth has large effects on private health insurance spending
that emerge with a four- or five-year lag (Chandra, Holmes, and Skinner
2013; Sheiner 2014). However, analyses of this type have important methodological
weaknesses. Unlike analyses that compare outcomes across different
geographic areas at the same point in time, time series analyses cannot control
for unobserved factors that might cause health care spending to change
over time. As a result, these approaches are at much greater risk of mistaking
changes in private health insurance spending growth that coincided with an
economic downturn for change in private health insurance spending growth
that were caused by an economic downturn.
Moreover, it is unclear whether the results from these analyses are
economically plausible. In particular, the most plausible way an economic
downturn could generate long-lasting effects on health care spending
growth is by changing the development and diffusion of medical technology.
However, as noted by Sheiner (2014), four to five years may be too soon
for a downturn to have meaningful effects on the path of medical technology,
given the long duration of the research and development process.
Furthermore, if economic downturns change the path of medical technology
in the medium term, that should affect spending growth in Medicare
in addition to private insurance. However, there is little evidence that economic
downturns affect spending growth in Medicare at any time horizon.
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