Could the Affordable Care Act Be Contributing to Slower Spending Growth?

The 2010 forecast for spending from 2014 to 2019 was reduced by $2.5 trillion in the 2014 forecast.

A recent report from the Urban Institute suggests that the Affordable Care Act (ACA) could potentially reduce healthcare costs, even though it is greatly expanding healthcare coverage.

In 2010, the US Centers for Medicare and Medicaid Services (CMS) estimated an increase in national health expenditures under the ACA by $577 billion from 2014 to 2019; however, in 2014, the CMS reduced its forecast by about $2.5 trillion.

Researchers in the current study compared the most recent CMS forecast released this month and compared it to the 2010 baseline forecast. The current 2015 forecast includes actual spending data from 2013, and estimated spending for 2014 through 2019.

The researchers found that 2014 to 2019 spending in the current forecast is $49 billion higher than in the previous year’s forecast; however, Medicaid spending decreased $123 billion from the 2014 forecast. Although overall spending is projected to increase, the forecast estimates a decrease of $2.6 trillion compared with the 2010 forecast.

The CMS projects that Medicare spending for 2014 to 2019 will be $455 billion less than projected in the 2010 forecast. The study suggests that the Budget Control Act of 2011 and slower-than-expected spending growth between 2010 and 2014 contributed to decreased spending.

Medicaid projections for 2014 to 2019 also decreased by $1050 billion in the current forecast compared with the baseline. Optional Medicaid expansion and lower enrollment rates were likely to be a contributing factor to this, according to the study.

For private insurance, the 2015 forecast was $664 billion lower than in the baseline forecast, which was largely due to slower spending growth and the shift towards higher deductibles and cost sharing. Out-of-pocket costs were approximately $2 billion more in the 2015 forecast compared with the baseline.

This increase could be linked to reductions in the effects of the ACA excise tax. The category of “other health spending” includes programs such as the Children’s Health Insurance Program, the US Department of Defense, and US Department of Veterans Affairs programs, public health, and other investments, such as construction and capital equipment.

This category fell by $456 billion compared with the baseline forecast due to declines in investment spending, according to the study. Although the CMS incorporated new ACA laws into their 2010 projections, there were additional cost decreases that could potentially be linked to the ACA.

ACA payments and reductions in Medicare hospital days, outpatient visits, skilled nursing facility days, and advanced imaging could have all taken part in decreasing the projections, according to the study.

Lower Medicare payment rates could have affected payments by other payers and commercial insurers as well. Certain other Medicare policies could have been adopted by other insurers, the study noted.

ACA marketplace plans also have lower than projected premiums because of competition, negotiations, and narrow networks. If the ACA and associated factors have contributed to slower spending growth, then healthcare costs may continue to fall below CMS yearly projections, the study concluded.