Health Care Spending Up by 9.9%, Reaches $43B in Q1 2014

Total health care spending during the first quarter of 2014 increased by 9.9% to $43.3 billion and contributed 1.1 percentage points to growth in the total gross domestic product, according to preliminary data released Wednesday by the Bureau of Economic Analysis, Modern Healthcare reports (Evans, Modern Healthcare, 4/30).

Analysts attributed the increase in health spending -- which was the highest rate in over three decades -- to more newly insured U.S. residents and the subsequent uptick in the use of medical services (Bettelheim, CQ Roll Call, 4/30).

The measurement of health care spending was based on estimates of:

• Enrollment trends in the Affordable Care Act's insurance exchanges;
• Medicaid benefits (Mutikani, Reuters, 4/30); and
• Consumer spending on hospitals, nursing homes, doctor visits and additional health care services.

The increase in health care spending was much higher than the surge economists and federal officials predicted would occur as millions of U.S. residents became insured under the ACA, Modern Healthcare reports (Modern Healthcare, 4/30).

Analysts noted that more consumers, particularly those who have been receiving federal subsidies to offset the cost of their new insurance, now have more money to seek medical care at hospitals and other providers, according to Reuters. Economists cited the combination of the subsidies and increased visits to hospitals for the surge in health spending (Reuters, 4/30).

According to The Hill, the growth in health care spending is distinct from growth in health care prices, which increased at a rate of 0.5% (Viebeck, The Hill, 4/30).

Health care spending could increase again during the second quarter of 2014, but growth would not be as rapid as during the first quarter, Reuters reports. Final data for health care spending in Q1 2014 are not expected until June, and the preliminary data on health spending and the GDP also could be revised before then (Reuters, 4/30).

Comments

Jason Furman, chair of the White House Council of Economic Advisors, noted in a blog post that the "increase [in spending] is neither a surprise, nor a cause for concern" and is in line with expectations as the ACA is implemented.

He added, "Furthermore, any upward pressure on health care spending growth from expanding insurance coverage will cease once coverage stabilizes at its new, higher level, so it does not affect the longer-term outlook for spending growth" (CQ Roll Call, 4/30).