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Rise in U.S. health care spending outpaces economic growth

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WASHINGTON — Health care spending in the United States grew 5.8% to $3.2 trillion during 2015, according to a new study by the Centers for Medicare & Medicaid ­Services (CMS).

On a per capita basis, U.S. health care spending grew 5% to $9,990 per person. The overall increase exceeded the 5.5% rise projected by CMS last summer.

Because health spending grew faster than the economy (by 2.1 percentage points), it also increased as a share of gross domestic product, accounting for 17.8%, up 40 basis points from 17.4% in 2014.

The study was performed by the Office of the Actuary at CMS and published as a Web First by Health Affairs. The report attributed the faster growth mainly to increased use of services as a result of significantly expanded health care coverage through the Affordable Care Act, as well as increased spending for retail prescription drugs.

The study, titled “National Health Spending: Faster Growth in 2015 As Coverage Expands and Utilization Increases,” points out that 20 million people obtained private health insurance or enrolled in Medicaid over a two-year period, largely due to the ACA. The percentage of Americans with some form of health insurance rose to 90.9% last year from 86% in 2013, as the number of uninsured fell to 29.2 million.

Those figures are actually quite close to the projections made by CMS in 2011, when the agency predicted that ACA would result in the percentage of insured Americans rising to 92.8% in 2015 from 84.4% in 2010, while the number of uninsured would decrease to 26.7 million from 48.5 million. Those projections were made before a Supreme Court decision reduced the scope of Medicaid expansion.

Significantly, CMS had projected that without ACA, health expenditures would reach $3.34 trillion by 2015 and account for 17.9% of GDP, growing at an annual pace of about 5.6%.

As Shirley Glied pointed out recently on the Health Affairs blog, within the framework of the 2011 CMS projections, the expanded coverage provided by ACA was achieved at virtually no cost to national health expenditures.

The study further notes that the rates of spending increase are lower than most years in the decade prior to passage of the ACA. During the years from 2000 to 2009, for instance, health care spending grew 2.8 percentage points faster than GDP on an annual average ­basis.

“Our significant progress in reducing the nation’s uninsured rate, while providing strong protections for Americans if they get sick, would not be possible without the Affordable Care Act,” says CMS acting administrator Andy Slavitt. “As millions more Americans have obtained health insurance, per-person cost growth remains at historically modest levels.”

Spending for prescription drugs grew faster than any other health care component, rising 9% to $324.6 billion. However, that rate represented a deceleration from the dramatic 12.4% jump recorded in 2014, which had followed a modest 2.3% rise in 2013.

The report’s authors attribute the 9% increase in drug expenditures to higher spending on new medicines, particularly specialty products including hepatitis C drugs, higher prices for existing branded drugs and increased spending on generics as fewer pricey blockbuster branded drugs went off patent.

While drug spending decelerated after the extraordinary spike in 2014, spending growth for most other health care components accelerated in 2015.

Hospital care, for instance, rose 5.6% to $1 trillion, up from a 4.6% increase in 2014. Similarly, physician and clinical services gained 6.3% to $634.9 billion, picking up momentum from a 4.8% increase in 2014. Spending on other professional services; dental services; other health, residential and personal care services; home health care; nursing care facilities; and durable medical equipment all picked up the growth pace in 2015.

In terms of who paid for health care in 2015, Medicare accounted for 20%, as spending under the program grew 4.5% to $646.2 billion, a deceleration from the prior year’s 4.8% rise as Medicare enrollment slowed. Medicaid, which made up 17% of spending, also saw spending slow to 9.7% from 11.6%. State and local Medicaid expenditures increased 4.9%, but Federal Medicaid outlays leapt 12.6%, mainly because of newly eligible enrollees under ACA.

Outside of government, private health insurance expenditures grew 7.2% to $1.1 trillion, or 33% of the total, in 2015, accelerating from a 5.8% rise the year before. That strong growth also was related to higher enrollment and use as a result of ACA.

Finally, out-of-pocket spending rose 2.6% to $338.1 billion, up from a 1.4% increase in 2014. Out-of-pocket expenditures made up 11% of the total.

Health care spending has been projected to grow at an average annual rate of 5.8% through 2025, but that estimate was based on the assumption that ACA would remain in effect. However, with both the president-elect and Republican majorities in Congress vowing to repeal the ACA at the earliest opportunity, the outlook for health care, and health care spending, in the United States is anything but clear.


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