Health Spending in U.S. Topped $3 Trillion Last Year
By: Robert Pear (NY Times) December 2015
WASHINGTON — Health spending in the United States last year topped $3 trillion — an average of $9,500 a person — as five years of exceptionally slow growth gave way to the Affordable Care Act’s expansion of Medicaid and private insurance coverage, and as prescription drug prices resumed their sharp climbs, the government said Wednesday.
Health spending grew faster than the economy in 2014, and the federal share of health spending grew even faster, as major provisions of the Affordable Care Act took effect.
Total spending on health care increased 5.3 percent last year, the biggest jump since 2007, and accounted for 17.5 percent of the nation’s economic output, up from 17.3 percent in 2013, the Department of Health and Human Services said in its annual report on spending trends. By contrast, health spending grew 2.9 percent in 2013, the lowest rate of increase since the federal government began tracking it in 1960.
The spending report comes as the Obama administration is already on the defensive over rising premiums and deductibles on insurance policies sold through the health law’s exchanges. Last month, UnitedHealth Group, one of the nation’s largest health insurance companies, significantly lowered its profit estimates and blamed the federal health care law.
Obama administration officials said Wednesday that the rise in health spending last year did not undermine their conviction that the Affordable Care Act had been a boon for the nation.
“Millions of uninsured Americans gained health care coverage in 2014,” said Andrew M. Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services. “And still the rate of growth remains below the level in most years prior to the coverage expansion, while out-of-pocket costs grew at the fifth-lowest level on record.”
But the new report will fuel Affordable Care Act opponents in Congress, who hope to pass legislation this week repealing President Obama’s signature domestic achievement. Slowing growth in health spending had been a crucial selling point for supporters of the law.
Anne B. Martin, an economist who was the principal author of the report, said that the growth of health spending last year was in line with projections by her office. The last recession, which began in December 2007 and continued until mid-2009, slowed health spending, as many people lost income and job-based coverage.
Retail spending on prescription drugs increased sharply last year, rising 12.2 percent to $297.7 billion, the administration said in its report, published in the journal Health Affairs.
“This rapid increase, which was the highest rate since 2002, was in part due to the introduction of new drug treatments for hepatitis C, as well as of those used to treat cancer and multiple sclerosis,” the administration said. The new treatments for hepatitis C, which are highly effective, accounted for $11.3 billion in new spending.
The numbers on retail drug spending do not include drugs administered at hospitals and doctors’ offices, where patients receive many high-cost specialty drugs. Spending at those sites is embedded in other categories of spending and is not separately reported.
Many people with hepatitis receive care through Medicaid, the federal-state program for low-income people. “Medicaid prescription drug expenditures grew 24.3 percent in 2014, up from growth of 4.2 percent in 2013, as a result of increased enrollment and spending for drugs that treat hepatitis C,” the administration reported.
Senate investigators said Tuesday that the makers of a breakthrough hepatitis drug, Sovaldi, had put profits ahead of patients in setting the initial price at $1,000 a pill, or $84,000 for a standard course of treatment.
Medicare prescription drug spending increased 16.9 percent last year, primarily because of the use of expensive new specialty drugs, including those for hepatitis, the report said.
Richard G. Frank, an assistant secretary of health and human services, predicted that “faster growth in spending due to rising coverage will be temporary, and will fade in the coming years.”
The report said the number of uninsured people fell by 8.7 million, or nearly 20 percent, to 35.5 million in 2014. As a result, it said, the share of the total population with insurance increased to 88.8 percent, the highest since 1987.
The federal government, which generally paid the full cost of Medicaid for newly eligible beneficiaries and which subsidized private insurance for many other people, accounted for well over half of the increase in national health spending last year.
Over all, federal health spending increased 11.7 percent, to nearly $844 billion in 2014, compared with an increase of 3.5 percent in 2013, the report said.
In addition, it said, “Medicaid spending by the federal government increased 18.4 percent in 2014,” to $305 billion, compared with an increase of 6.1 percent in 2013.
Private health insurance spending grew 4.4 percent and reached $991 billion in 2014, accounting for one-third of national health spending.
Total Medicaid spending by federal, state and local government agencies reached $495.8 billion last year, an increase of 11 percent over the prior year, reflecting the fastest rate of growth since 2001. Enrollment in Medicaid increased by 13.2 percent, to 65.9 million people — the fastest rate of growth since 1991.
But spending per Medicaid beneficiary declined 2 percent, to $7,520, as “the newly insured tended to be lower-cost individuals,” the administration said.
“Total Medicare spending reached $618.7 billion in 2014 and accounted for 20 percent of total health expenditures,” the report said. “After growing 3 percent in 2013, Medicare spending grew 5.5 percent in 2014. This was the fastest rate of growth since 2009 and was primarily attributable to faster growth in spending for prescription drugs” and doctors’ services, among other factors.
Medicare spending averaged $11,700 per beneficiary last year, representing an increase of 2.4 percent. By contrast, spending per beneficiary was virtually flat in 2012 and 2013.
