Health Spending Exceeds Inflation, but Still Rising Less Than Before ACA

Prescription drug spending didn't rise as much as it did in 2014, but it still outpaced all other categories.

CMS released data Friday that show the "glass half-empty, half-full" nature of health spending since the passage of the Affordable Care Act (ACA). While healthcare spending in 2015 still stubbornly rose faster than the rest of the economy, it’s rising more slowly than before the law passed, despite millions of previously uninsured patients accessing the system, according to the annual report of the CMS Office of the Actuary.

Per-capita healthcare spending grew 5.0% while overall health spending rose 5.8%, according to the data, published in Health Affairs. On a per-enrollee basis, overall spending increased 4.5% for private health insurance, 1.7% for Medicare, and 3.8% for Medicaid.

However, healthcare continues to consume more and more of the nation’s economy, which has been a concern among policy makers for some time. Spending on healthcare grew 2.1 percentage points faster than the overall economy in 2015, driving a 0.4 percentage point increase in the healthcare component of the gross domestic product (GDP). Healthcare now makes up 17.8% of GDP, up from 17.4% in 2014.

CMS’ statement pointed out that prior to the ACA, from 2000 to 2009, healthcare spending rose 2.8 percentage points faster than GDP. Healthcare spending is growing far faster than inflation, which was only 0.7% in 2015.

Prescription drug spending rose significantly in 2015, up 9.0% in 2015. That’s less than the 12.4% seen in 2014, but it still “outpaced all other services,” according to details from the actuary. By comparison, drug spending increased 2.3% in 2013—the last year before full implementation of the ACA. Polls find the cost of prescription drugs is a top consumer concern, regardless of party identification; the Kaiser Health Tracking Poll found that voters going into the 2016 election were especially concerned about those with chronic conditions having access to expensive therapies.

John Rother, executive director of the Campaign for Sustainable Rx Pricing, said the data make it clear that prescription drug prices are driving up overall heatlhcare spending. "Today's CMS data only tell half the story, though, because they don't include prescription drugs administered in a hospital or doctor's office. When you include those settings, prescription drug spending has increased more than 20% over the last few years."

CMS Acting Administrator Andy Slavitt lauded what he saw as progress under the ACA, which President-elect Donald J. Trump has vowed to repeal and replace.

“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,” Slavitt said in a statement. “As millions more Americans have obtained health insurance, per-person cost growth remains at historically modest levels.”

Noteworthy items in the report include:

· Despite predictions that the ACA might lead employers to abandon sponsored coverage and push workers onto the exchanges, enrollment in employer-sponsored plans rose in 2015.

· Per-enrollee spending increases in Medicare (1.7%) are well below rates from 2000 to 2009, when they averaged 7.0%, or 5.8% when Medicare Part D is excluded. Medicare spending grew at a slightly slower rate (4.5%) than overall health spending, and at a slower rate than in 2014 (4.8%) even as more baby boomers join the program. Thus, critics have taken issue with House Speaker Paul Ryan’s statement that Medicare is “going broke” because of the ACA. Medicare’s trustees have found the law has strengthened the program.

· Medicaid has likely seen the most dramatic changes under the ACA due to expansion. In 2015, there was less enrollment growth than in 2014 (5.7% vs 11.1%), but more per-enrollee spending due to comparatively newer users accessing services.

· On prescription drugs, CMS cited continued high spending on hepatitis C drugs, the cost of existing brand name drugs, and fewer blockbuster drugs coming off patent. The report also cited the more recent trend of cost increases for generic drugs.

· Who pays for healthcare? In order, the federal government (29%), private households (28%), private businesses (20%), and local governments (17%).