National Health Care Spending Growth Slows Under ACA

CMS report shows spending rates are lower compared with the years prior to health care reform.

Despite millions of previously uninsured individuals newly armed with health benefits flooding into the marketplace, health care spending growth nationwide continues to lag behind the rates seen prior to the passage of the Affordable Care Act (ACA).

In a study published in Health Affairs, the Centers for Medicare & Medicaid Services (CMS) found that health care spending rates in 2014 were lower than growth rates during most years before the ACA, with a per capita spending increase of 4.5% and overall health spending increase of 5.3% last year.

Additionally, consumer out-of-pocket spending had a mild increase of just 1.3% last year compared with 2.4% growth in 2013, which reflects a greater number of individuals with health coverage, according to CMS.

“Millions of uninsured Americans gained health care coverage in 2014,” said CMS Acting Administrator Andy Slavitt. “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.”

Under the ACA, 8.7 million people gained coverage in 2014, causing the insured proportion of the population nationwide to grow from 86% in 2013 to 88.8% in 2014, which is the highest share since 1987, the study noted.

Meanwhile, overall health care spending increased 1.2 percentage points faster than the overall economy last year, representing a 0.2 percentage-point increase (17.3% to 17.5%) in the health care spending share of gross domestic product (GDP).

From 2000 to 2009, annual health care spending increased by an average of 6.9%, which was 2.8 percentage points faster than the GDP.

The report further noted that total private health insurance expenditures jumped 4.4% to $991 billion in 2014 compared with a 1.6% increase in 2013, which was the slowest rate seen since 1967. Total private health insurance expenditures represented 33% of total health care spending last year.

This faster rate of growth was attributed to the impact of expanding coverage through Marketplace plans, health insurance premium tax credits, new industry fees, and changes to benefit designs, CMS wrote. Researchers also found that per-enrollee spending grew by 3.2% in 2014, with an average growth in per-enrollee spending of 7.4% from 2000 to 2009.

Medicare spending represented 20% of national health spending last year, with an increase of 5.5% to $618.7 billion, compared with 3% percent growth in 2013. This growth rate was a result of increased spending on retail prescription drugs and in Medicare Advantage, with a per-enrollee spending jump of 2.4%. The average growth in per-enrollee spending from 2000 to 2009 was 7%.

Medicaid spending represented 16% of total spending on health, with an 11% increase in 2014 to $495.8 billion, compared with 5.9% growth in 2013. The growth in Medicaid last year was attributed to coverage expansion under the ACA for individuals with incomes up to 138% of the federal poverty level.

This added approximately 6.3 million eligible enrollees to Medicaid in 2014, as per-enrollee spending dropped by 2%. The report showed out-of-pocket spending increased 1.3% in 2014 to $329.8 billion, compared with a 2.1% increase in 2013.

CMS attributed this slower growth rate to expanded insurance coverage with a corresponding decline in the number of uninsured individuals.

Spending on retail prescription drugs jumped 12.2% in 2014 to $297.7 billion, compared with 2.4% growth in 2013. This growth was attributed to greater spending on new medications, specifically on specialty drugs; less impact from patent expirations; and price increases for brand-name drugs.

“Today’s report reminds us that we must remain vigilant in focusing on delivering better health care outcomes, which leads to smarter spending, particularly as costs increase in key care areas, like prescription drugs costs,” Slavitt said.