Spending Growth Dropped to Historical Low

The announcement that the rate of healthcare spending growth dropped to a historic low in 2013 is presented as a positive development for the long-term fiscal health of the country and welcome news for the Obama Administration. Many outlets are reporting that the Affordable Care Act contributed to the continued slowdown. For instance, USA Today (12/4, Ungar, O’Donnell) reports that on Wednesday, the Centers for Medicare and Medicaid Services announced that “health care spending in the U.S. grew last year at the lowest rate ever recorded,” and that it was “due in part to the Affordable Care Act.”

The Los Angeles Times (12/4, Levey) reports that total spending on healthcare “increased just 3.6% last year to $2.9 trillion, according to the study from independent analysts at the Department of Health and Human Services.” That rate is down from 4.1 percent in 2012 “and way down from 2002, when health spending increased by nearly 10%.”

The Washington Post (12/3, Millman) reports in its “Wonkblog” that most healthcare services saw a lower rate of spending growth in 2013 compared to 2012. Most of the $2.9 trillion the United States spent on healthcare went toward “hospital care ($936.9 billion), physicians and clinical services ($586.7 billion), and prescription drugs ($271.1 billion).”

The AP (12/4, Alonso-Zaldivar) reports the study found that healthcare spending in 2013 also “remained stable as a share of the total U.S. economy, accounting for 17.4 percent.” Spending growth slowed “in several key areas, including hospital care, doctors’ services, Medicare spending, private health insurance, and out-of-pocket spending by consumers.”

Robert Pear of the New York Times (12/3, Pear, Subscription Publication) says that the Administration believes that “among factors restraining the growth of health spending” are “new limits on Medicare payments…automatic across-the-board cuts in federal spending required by” the ACA, and “the proliferation of high-deductible health insurance plans.” National Journal (12/4, Subscription Publication) has an analysis titled, “Obamacare And The Weak Economy Are Slowing Health Care Spending Growth.” National Journal’s Sam Baker writes that “much of the slowed growth rate is owing to the sluggish economy,” although Baker adds that the ACA is “also playing a part.”

Steve Teske of Bloomberg BNA (12/4) says “there has been widespread disagreement about the reasons for the slowdown,” and while “some have argued ACA provisions have contributed to it…others have claimed the slow economy is the biggest factor.” However, the Huffington Post (12/3, Young) reported that “spending is projected go up faster this year and in the near future,” and that it will be “driven in part by…new Obamacare spending.” It is also noted that the ACA was not fully implemented in 2013 and that the law’s impact on overall spending may be a cause for concern for consumers.

In fact, some reports posit that part of the reason for the relatively slow growth in healthcare spending is that people who bought high-deductible insurance plans via the ACA’s marketplaces cannot afford to seek medical care because they do not have the cash on hand to pay their out-of-pocket expenses. Under the headline, “More Cost Of Health Care Shifts To Consumers: High-Deductible Insurance Plans Prompt Some to Delay Treatment,” the Wall Street Journal (12/3, Armour, Subscription Publication) explores the consumer behavior changes caused by the ACA’s implementation. Drew Altman, president of the Kaiser Family Foundation, is quoted as saying, “There has been a steady increase in deductibles and the main effect is to reduce use.”

USA Today (12/4, Ungar, O’Donnell) reports that CMS “attributed” the “slowing growth in health care spending to…factors including relatively slow economic growth and more gradual increases in private health insurance and Medicare spending.” USA Today notes that Micah Hartman of CMS’s Office of the Actuary pointed out that “more high-deductible insurance plans and increases in the percent of health care costs borne by consumers also contributed to the slower rate of increase” because “the more people have to pay for health care treatment out of pocket, the less they tend to use.”

The Huffington Post (12/3, Young) noted that the CMS Office of the Actuary “expects these record-low rates of increase won’t continue forever,” and “spending is projected go up faster this year and in the near future, though it’s still expected to be slower than during prior decades.” For 2014, CMS “projects health care spending will increase more than 5 percent to $3.1 trillion, driven in part by faster economic growth and in part by new Obamacare spending on subsidized health insurance and Medicaid coverage,” according to the Huffington Post.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary