National Health Care Spending Rose Faster Last Year Because More People Got Care

National Health Care Spending Rose Faster Last Year Because More People Got Care

Arminda Murillo, 54, reads a leaflet on Obamacare at a health insurance enrollment event in Cudahy, California, on March 27, 2014.
journal Health Affairs.

Total national expenditures grew by 5.8 percent in 2015, the largest year-to-year increase since 2007, and 0.5 percentage points faster than in 2014, when the Affordable Care Act’s expansion of coverage began. According to the Department of Health and Human Services, more than 20 million previously uninsured people have gained coverage from private health insurance or Medicaid since 2014, and the Centers for Disease Control and Prevention has reported the uninsured rate is at an all-time low.

“Our significant progress in reducing the nation’s uninsured rate, while providing strong protections for Americans if they get sick, would not be possible without the Affordable Care Act,” Andy Slavitt, acting CMS administrator, said in a press release. “As millions more Americans have obtained health insurance, per-person cost growth remains at historically modest levels.”

From 2009 to 2013, health care spending rose at the lowest annual rates in the more than half-century that the actuaries have produced these annual reports, increasing an average of just 4 percent a year over that time. This followed decades of more rapid acceleration in health care spending that at times reached double digits per year.

The consensus has been that this unusually slow growth was mainly a consequence of the Great Recession and slow recovery at the beginning of this decade. Historically, Americans spend less on health care during economic downturns because of job loss and lower income, and expenditures rebound when the economy improves.

That pattern appears to have repeated itself, but President Barack Obama’s administration and some economists also believe the cost-containment provisions of the 2010 health care reform law contributed to the slowdown by encouraging efficiencies in the health care system, even as it ramped up spending on medical care for newly covered people. And the nation is spending less on health care than projected before Obama enacted the Affordable Care Act.

The coverage expansion is reflected in the 2015 spending patterns. Expenditures on hospital care, physician and clinical services rose faster than during the prior year as people received more medical care. Prescription drug spending growth, by contrast, slowed compared to 2014.

Notably, rising prices for medical services and products were less a factor in overall spending growth than was the increase in the amount and intensity of medical care people received in 2014 and 2015. That breaks with historical trends, when price hikes constituted a bigger share of the year-to-year growth.

The results of the election make predicting future trends difficult. Prior to Donald Trump’s winning the White House and Republicans’ maintaining control of Congress - putting them in position to repeal the Affordable Care Act and make other, sweeping changes to the health care system - the actuaries at the Medicare agency had projected that overall spending would rise by an average of 5.8 percent a year from 2015 to 2025, and that health care eventually would constitute one-fifth of gross domestic product.

Doing away with the Affordable Care Act would dramatically change the equation. Eliminating the law’s Medicaid expansion, the subsidies it provides for private insurance and its guarantee of coverage for people with pre-existing conditions will shrink the insurance rolls and reduce costs for the federal government.

But repeal also would do away with cost-containment policies, such as not paying hospitals to re-treat patients for the same condition if they must return within 30 days for more care. And some portion of the reduced federal spending will simply shift to individuals paying out of pocket for health care and to hospitals and others that will provide charity care and absorb unpaid bills.

Trump and congressional Republicans also vow to devise a new health care agenda that will succeed the Affordable Care Act, but since they currently have no such plan - and may not for another three years - evaluating its effects on health care spending is problematic.



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