Health care spending ticked up as ACA’s coverage expansion took effect, new data shows

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Posted by Anne Phelps, Deloitte Advisory Principal, US Health Care Regulatory Leader on December 10, 2015.

The Centers for Medicare and Medicaid Services (CMS) on December 2, 2015, released data on National Health Expenditures for 2014, the first year of the health coverage expansion under the Affordable Care Act. Overall health care spending increased by 5.3 percent to $3 trillion in 2014, while per capita health care spending increased by 4.5 percent to $9,523 per person. By comparison, health care spending increased by 2.9 percent in 2013, the lowest rate in the 55-year history of CMS’ National Health Expenditure Survey.

Overall health care spending grew 1.2 percentage points faster than the overall economy in 2014. Health spending accounted for 17.5 percent of GDP in 2014, up from 17.3 percent in 2013.

CMS attributes the faster rate of spending growth to the ACA’s coverage expansion, particularly through Medicaid and the ACA Exchanges. The percentage of the population with health insurance increased from 86 percent in 2013 to 88.8 percent in 2014, the highest share of the population to have health coverage since 1987.

CMS attributes the faster rate of spending growth to the ACA’s coverage expansion, particularly through Medicaid and the ACA Exchanges. The percentage of the population with health insurance increased from 86 percent in 2013 to 88.8 percent in 2014, the highest share of the population to have health coverage since 1987.

Health care stakeholders should monitor the reaction to the report by members of Congress and the Administration, especially as implementation of the ACA continues. In addition, the news on increased prescription drug spending as outlined in the report could draw attention as candidates debate health care issues in the 2016 elections.

Spending by type of service

According to CMS, a significant increase in prescription drug expenditures helped drive the increase in health care spending in 2014. Prescription drug spending increased by 12.2 percent in 2014, up from an increase of 2.4 percent in 2013. The increase in drug spending was attributed to higher spending for new medications (particularly for specialty drugs), a smaller impact from patent expirations, and price increases for brand-name drugs.

Spending for hospital care increased by 4.1 percent in 2014, after growing by 3.5 percent in 2013. The data shows that the faster growth in spending in 2014 was affected by the growth of non-price factors, such as the use and intensity of hospital services. The coverage expansion through Medicaid and the ACA Exchanges also contributed to the faster rate of growth for hospital care.

Sources of health spending

In 2014, households and the federal government accounted for the greatest share of health care spending at 28 percent each, followed by contributions from private businesses at 20 percent.

Expenditures for private health insurance increased by 4.4 percent in 2014, accounting for 33 percent of total health care spending. By comparison, private health insurance expenditures increased by 1.6 percent in 2013, the slowest rate since 1967.

Out-of-pocket spending increased by 1.3 percent in 2014, down from 2.4 percent in 2013. CMS attributes this slowdown to the coverage expansion under the ACA.


Anne Phelps
Deloitte Advisory Principal
US Health Care Regulatory Leader
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Deloitte Advisory Senior Manager
Deloitte & Touche LLP

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