Report: Health Care Spending Growth Slowdown Could Be Ending
The country's five-year slowdown in health care spending growth could be coming to an end, according to a report released Tuesday by federal actuaries, the New York Times' "The Upshot" reports (Sanger-Katz, "The Upshot," New York Times, 7/28).
According to the report, U.S. health spending totaled $3.1 trillion in 2014 (Johnson, "Wonkblog," Washington Post, 7/28).
The actuaries noted U.S. health spending grew by 5.5% in 2014 and is anticipated to grow by 5.3% this year (Radnofsky, Wall Street Journal, 7/28). The report projected U.S. health spending will grow by about 5.8% annually on average through 2024. That is up from 4% annual health spending growth between 2007 and 2013 ("The Upshot," New York Times, 7/28). The actuaries predicted that health care spending growth will peak at 6.3% in 2020 (Wall Street Journal, 7/28).
However, the report stated that health spending growth is not expected to reach the levels it had before the slowdown, which averaged 9% annually for 30 years.
According to the report, health spending growth slowed alongside the economy and is expected to rise as the U.S. economy continues to improve ("The Upshot," New York Times, 7/28). The report predicted U.S. health spending growth will outpace that of the total economy by about 1.1 percentage points. In addition, health spending will account for about one-fifth of the U.S. economy by 2024, according to the report.
Overall, the actuaries projected federal and state governments would be responsible for about 47% of U.S. health spending in 2024, up from the 43% in 2013 (Wall Street Journal, 7/28).
Larger Spending Increases Not Surprising
According to "The Upshot," the uptick in health spending increases is not surprising, given coverage expansions under the Affordable Care Act. Under the law, millions of newly insured U.S. residents are now using health care services ("The Upshot," New York Times, 7/28). According to the report, the U.S. uninsured rate is expected to decline from 14% in 2013 to 7.6% in 2024 (Levey, Los Angeles Times, 7/28).
In addition, states are spending more on Medicaid through the ACA's expansion ("The Upshot," New York Times, 7/28). The actuaries predicted about 78.1 million people will be enrolled in Medicaid by 2024 (Wall Street Journal, 7/28).
According to the actuaries, coverage expansions were the main driver of health spending increases, with no notable increases in costs of health plans or services ("The Upshot," New York Times, 7/28). However, the report predicted that medical costs will increase by more than 2% annually beginning in 2016, marking the first increase in such costs since 2011 (Humer, Reuters, 7/28).
Meanwhile, the report did note increases in spending on prescription drugs, mostly on new treatments for hepatitis C. According to the report, prescription drug spending increased by 12.6% in 2014, up from a 2.5% increase in 2013 ("The Upshot," New York Times, 7/28).
In addition, the report cited an aging population as another factor driving health spending growth. By 2024, the actuaries predicted 70.3 million people will be enrolled in Medicare (Wall Street Journal, 7/28). According to the report, higher health care costs for older U.S. residents will begin pushing health spending growth in 2019 (Reuters, 7/28).
Little Change From Last Year
Overall, the new projections are not much different than estimates the actuaries released last year, according to "The Upshot" ("The Upshot," New York Times, 7/28). The actuaries noted the growth projections could have been larger but were muted by U.S. residents paying greater shares of their medical expenses and curbing their use of health care services (Wall Street Journal, 7/28). According to the report, U.S. residents' average annual health care costs likely will reach $4,216 in 2024, up from $2,618 last year (Los Angeles Times, 7/28).
It remains unclear whether health spending will level off at a slower growth rate once newly insured individuals are assimilated into the system or whether spending growth will increase at higher rates over the long term. According to "The Upshot," it could take years before those who gained coverage under the ACA are fully settled into the U.S. health system and the law's long-term effects are visible.
Some experts think the spending projections are too high. For example, Charles Roehrig, a vice president at the Altarum Institute, said, "I think that if we get back onto the path we were on before the recession, which was a steadily declining excess growth rate, that we ought to be able to get below" the actuaries' projections ("The Upshot," New York Times, 7/28).
Further, Gigi Cuckler, an economist at CMS' Office of the Actuary, said an increase in people with high-deductible health plans will help to constrain federal health spending as those individuals tend to use fewer health care services. In addition, improved price transparency and smaller provider networks could help to lower health care costs.
Meanwhile, others noted health care spending growth could slow again if the overall U.S. economy also dips.
Tom Getzen, a health economist at Temple University, said, "By far the biggest impact on health care spending is how much you have to spend. It critically depends on how the economy grows" (Herman, Modern Healthcare, 7/28).
While the long-term trend is uncertain, some experts said health spending growth will be an issue that needs to be addressed by policymakers in the future.
Douglas Holtz-Eakin, president of the American Action Forum, said the report's "main point is that the bill will continue to grow faster than the economy, which is what pays the bill." He added, "The next president faces the task of reining in the growth of federal entitlement spending."
Dan Mendelson, CEO of Avalere Health, also said the issue "becomes something of a liability for anybody coming into office, and they need to have a very proactive policy to address it" (Alonso-Zaldivar, AP/Miami Herald, 7/29).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.