Rich Daly | December 2, 2015
National healthcare expenditures increased by 5.3 percent in 2014, a jump from 3.6 percent in 2013, according to federal data released this week.
The acceleration in growth followed six years in which growth was less than 5 percent.
However, the faster growth was in line with a forecast by the Centers for Medicare & Medicaid Services that had predicted a 5.5 percent spending increase in 2014. Among the factors that were predicted to fuel faster growth were health insurance coverage expansions authorized by the Affordable Care Act (ACA) and rapid growth in prescription drug spending. Among the factors predicted to moderate spending were increased cost-sharing requirements in private health insurance plans and medical inflation rates that were near historical lows.
“Aggregate healthcare spending growth in 2014 had been widely predicted by economists, and it is not surprising given that more people are covered and getting the health care they need,” Richard Frank, assistant secretary for Planning and Evaluation at the U.S. Department of Health and Human Services, said in a written statement. “Faster growth in aggregate spending due to rising coverage will be temporary and will fade in the coming years.”
Healthcare spending growth is projected to average 5.8 percent during 2014–24, due to the coverage expansions, faster economic growth, and an aging population.
Overall, healthcare spending grew 1.2 percentage points faster than the economy in 2014, resulting in an increase in the healthcare-spending share of gross domestic product from 17.3 percent to 17.5 percent.
Other Findings
Other notable findings in the data included:
- Per-enrollee spending grew by just 3.2 percent in private insurance and 2.4 percent in Medicare.
- Aggregate consumer out-of-pocket costs increased by 1.3 percent.
- Spending on retail prescription drugs grew by 12.2 percent in 2014, compared with 2.4 percent in 2013.
Frank underscored that an increase in aggregate spending growth due to expanding coverage does not translate into higher costs for individuals and families who already had coverage. What matters for them is growth in per-enrollee spending, which remained low in 2014.
“Notably, the report also indicates that the share of national health expenditures borne by consumers fell to its lowest level ever,” Frank said.
The 1.3 percent increase in out-of-pocket spending, which was a reduction from 3.2 percent in 2013, meshed with the findings of other reports. For instance a recently released annualreport by the Health Care Cost Institute found out-of-pocket costs for privately insured consumers increased 2.2 percent in 2014.
Despite that slower growth, one-quarter of Americans with private health insurance had premiums and/or out-of-pocket costs that were unaffordable in 2014 and 2015, according to The Commonwealth Fund Health Care Affordability Index.
A Closer Look
Other accelerations occurred in total private health insurance expenditures, which reached $991 billion in 2014. The 4.4 percent increase was a significant jump from 1.6 percent in 2013.
The report credited the faster rate of growth to coverage expansions through the ACA marketplace plans, health insurance premium tax credits, new industry fees, and changes to benefit designs.
Medicare spending, which represented 20 percent of national healthcare spending in 2014, grew 5.5 percent to $618.7 billion, compared with 3 percent growth in 2013. The increase was driven by growth in spending on retail prescription drugs and in Medicare Advantage, according to the report. Per-enrollee spending increased by 2.4 percent.
The biggest acceleration occurred in Medicaid spending, which comprised 16 percent of total healthcare spending in 2014. Medicaid spending increased by 11 percent, compared with 5.9 percent in 2013, in large part due to eligibility expansion adopted by 26 states as authorized by the ACA—an estimated 6.3 million newly eligible enrollees were added to Medicaid in 2014. However, per-enrollee spending decreased by 2 percent.
According to the report, a key factor in the substantial acceleration of retail prescription drug spending was spending on new medicines—especially on specialty drugs, such as those used to treat hepatitis C. Prescription drug spending increased among private health insurance, Medicare, and Medicaid.
Source: HFMA