Healthcare Spending Continues to Grow Slower Under the ACA

December 7, 2015

After 5 years of low growth, CMS reports that national health spending grew 5.3% in 2014, which is still slower than most years prior to the implementation of the Affordable Care Act.

Healthcare spending rates in 2014 were lower than those seen during most years before the passage of the Affordable Care Act (ACA). Per capita spending grew by 4.5% and overall health spending grew by 5.3%, according to new data from CMS published in Health Affairs.

Consumer out-of-pocket spending grew by only 1.3% in 2014, compared with 2.4% in 2013, which reflects the higher number of individuals with healthcare coverage, according to the authors of the CMS report.

“Millions of uninsured Americans gained health care coverage in 2014 and still the rate of growth remains below the level in most years prior to the coverage expansion,” CMS Acting Administrator Andy Slavitt said in a statement. Out-of-pocket costs grew at the fifth lowest level on record, he added.

The ACA allowed 8.7 million people to gain health insurance coverage in 2014 compared with 2013, and the insured share of the population rose from 86% in 2013 to 88.8% in 2014, which the study notes is the highest share since 1987.

The increase in spending growth from 2013 was driven primarily by millions of new people with health insurance coverage because of the ACA, and by rapidly rising prescription drug costs. Overall, spending on prescription drugs rose by 12.2% in 2014, compared with 2.4% growth in 2013, which data suggest was fueled largely by spending for new medications—especially specialty drugs such as treatments for hepatitis C.

On a per-enrollee basis, overall spending increased by 3.2% in private health insurance plans and by 2.4% for Medicare; it decreased by 2.0% in Medicaid.

Overall, healthcare spending grew 1.2 percentage points faster than the overall economy in 2014, resulting in a 0.2 percentage point increase in the health spending share of gross domestic product (GDP), from 17.3% to 17.5%. In the decade before approval of the ACA, healthcare spending grew by an average of 6.9% annually, 2.8 percentage points faster than GDP, the report found.

Medicare spending grew 5.5%, a faster rate of increase than in 2013 (3%). The rate of growth was driven by increased spending growth for retail prescription drugs and Medicare Advantage, in which per-enrollee spending increased by 2.4%. Medicaid spending made up 16% of the total spending on health and grew 11% in 2014, a faster increase than the 5.9% growth in 2013. Medicaid growth in 2014 was driven by the ACA’s Medicaid coverage expansion in 26 states and the District of Columbia, which added an estimated 6.3 million new enrollees in 2014.

In 2014 households and the federal government accounted for the largest shares of spending (28% each), followed by private business (20%) and state/local governments (17%).

“[This] report reminds us that we must remain vigilant in focusing on delivering better health care outcomes, which leads to smarter spending, particularly as costs increase in key care areas, like prescription drugs costs,” Slavitt said.