One of my favorite lessons from Daniel Gilbert, the Harvard psychologist, is that the future is rarely as hellish or as heavenly as we imagine it to be. It's not an argument for ignoring future realities—savings are still crucial, global warming is still real—but rather a caution about overreacting to faraway fears when there is so much that deserves our attention today. "If you can adapt surprisingly well to negative events," he said when I spoke with him in 2011, "then you probably need less insurance than you're buying."
It's funny that Gilbert mentioned insurance at the time, because it is this week's health-insurance news that made me think about Gilbert's advice, again.
Five years ago, with federal deficits soaring to record highs, it was easy to say that the future of U.S. healthcare would be hell. This view argued for dramatically restructuring the way the government spent money on medical care and other services. Projections shared by responsible economists said federal healthcare spending was on pace to gobble up half of the budget within a few decades—or $1 in every $10 of GDP by 2035. Some analysts said that if we wanted to preserve our future, our very way of life, it was necessary to make deep, painful, and brave cuts to benefits. It was a compelling argument.
But five years later, we've relearned the lesson we seem to get whenever a team of experts unites around a prediction: Predictions are hard. New healthcare spending projections are out this week, and they tell a very different U.S. healthcare story. We're now projected to spend hundreds of billions of dollars less on medical care that we thought in 2009. The Congressional Budget Office now says that healthcare costs will grow about 20 percent slower than they estimated just five years ago.
2 Health-Spending Projections, 5 Years Apart
The reasons why are myriad and hard to untangle. Some of the slowdown is Obamacare reforms and cuts to Medicare. Some of it is the recession, which suggests that the healthcare spending will ramp up again in the next few years. The expansion of high-deductible plans, states' efforts to control Medicaid spending, and fewer new technologies being introduced to hospitals—all of this could be playing a role.
But the trend isn't uniquely American. Healthcare costs, which once ran rampant all over the developed world, are now slowing all over the developed world.
It would be irresponsible to suggest that the 2014 projections are correct. They're just more recent, include more data, and therefore are more relevant to our thinking about the future. In five years, high-deductible plans could fall out of favor, Obamacare could be repealed, organ-printing machines could be shipped to every middle-class household, or avian flu could kill us all. But for now, the monster of healthcare inflation appears smaller than it once seemed.
This isn't the end of healthcare spending projections and it's certainly not the closing bell on budget politics. Federal spending on Social Security and the major healthcare programs is still projected to double its historic share of the federal budget in a few decades. But the facts at the heart of the deficit hawks' doomsday case have changed dramatically in the blink of an eye. Scary budget projections call us to urgency without calling attention to the fact that their underlying assumptions could change fairly quickly. For now, the government should avoid spending too much of our present resources to avoid a future that might, in the Gilbertian sense, be much more easy to deal with than we imagine.
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