Care spending likely to accelerate again

Overall, the actuaries projected federal and state governments would be responsible for about 47% of U.S. health spending in 2024, up from the 43% in 2013 (Wall Street Journal, 7/28). Consumers are less likely to use healthcare services if they have to pay more out of pocket, which drives down spending. Increased price transparency and narrow provider networks also are expected to keep healthcare prices in check. The authors noted that this rate of growth is still substantially lower than the 9 percent average rate seen in the three decades before 2008. “But they’re not going to reach levels where they were in the pre-recession time”.

That trend reversed in 2014, when the national healthcare reform law, often called Obamacare, extended insurance to millions of Americans through the expansion of the Medicaid program and new individual insurance plans. About 8.4 million Americans gained coverage under the ACA in 2014, according to CMS. Economic indicators show that that has resulted in higher hospital and ambulatory spending. Spending is projected to grow an average of 5.8 percent annually over the next decade. But the program is projected to have grown by 12 percent in 2014, again boosted by coverage expansion under the health care law.

The 5.5 percent rise in medical costs last year – the first time since 2007 that spending jumped by more than 5 percent – was exacerbated by drug costs. For example, leukemia drug Blincyto can cost more than $178,000 a patient.

In addition, the report cited an aging population as another factor driving health spending growth. The final program would cover the costs of doctors’ visits but not the medication. The Oregon Health Insurance Experiment, a randomized controlled experiment in which a group of people were assigned Medicaid and then tracked along with a group who were not, found that the people who got coverage under the experiment used more health care, and that, in general, coverage served as a financial shock absorber. He points out that major economic events, like the stock market’s implosion in 2008, will ultimately be more important in determining whether the country is on a sustainable course. Sommers is a health economist with Harvard’s T.H. Chan School of Public Health and a primary care physician with Brigham and Women’s Hospital in Boston. “It critically depends on how the economy grows” (Herman, Modern Healthcare, 7/28).

Opponents of universal health care say the government has too much control over people’s lives already. Almost 19.1 million enrollees are expected by 2024, according to the report. Baby boomers started becoming eligible for Medicare in droves in 2011. By 2030, Medicare will be serving twice as many people as it did in 2000.

Based on their estimates, health care spending growth will still outpace growth in gross domestic product – rising 1.1 percent faster per year – meaning health spending as a percent of GDP is expected to rise to 19.6 percent by 2024, up from 17.4 percent.