Health Care Spending Down, For Now

The latest federal estimates of health care spending offer some good news: The growth rate for spending in 2013 will remain at a low level for the fifth straight year. But the bad news is, spending is expected to rise faster than growth in the economy over the next 10 years.

The big unanswered question is what role the Affordable Care Act has played and will play in prodding the health care system to adopt more efficient practices. The act uses competition among insurers and providers to hold costs down, offers free preventive services to head off more serious illnesses, and has started pilot projects to test new ways of paying doctors to manage a patient’s care, which will likely reduce needless hospitalizations and emergency room visits. While the recession and slow recovery may be the key factor holding down health care spending for now, some economists believe the act, by adjusting the behavior of health care providers, will continue to reduce growth in future spending.

The annual projections issued on Wednesday by experts at the Centers for Medicare and Medicaid Services estimated that national health expenditures would grow by 5.6 percent in 2014, up from 3.6 percent in 2013, and by an average of 6 percent a year from 2015 until 2023. For the entire 2013-23 period, national health expenditures would grow about 1.1 percentage points faster than gross domestic product. Ideally, health expenditures should grow no faster than the economy. But compared with past decades, these projected increases are an improvement; from 1990 to 2008, health spending rose at an annual rate of 7.2 percent, about 2 percentage points faster than G.D.P.

To read more, click here.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary