Human Capital & Careers

U.S. Health Care Spending Rises 5.3%

Retail prescription drugs were among the fastest-growing categories, up 12.2%.
Matthew HellerDecember 3, 2015
U.S. Health Care Spending Rises 5.3%

After years of slow growth in health care costs, spending surged 5.3% last year, reflecting the influx of people gaining insurance coverage under Obamacare.

With 65.9 million people now enrolled in private health plans or Medicaid, spending on hospitals, doctors, drugs, and other health-care items hit $3 trillion in 2014, the largest increase since President Barack Obama took office, according to a report by government actuaries.

In 2013, healthcare costs rose only 2.9%, the slowest in the 55 years the U.S. has tracked the number.

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“Today’s 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,” Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, said in a news release.

Numerous Affordable Care Act provisions became effective in 2014, including the implementation of marketplace plans, the introduction of health insurance premium tax credits, new health insurance industry fees, and mandated changes to benefit designs.

All of these changes, the report said, “created upward pressure on 2014 private health insurance spending growth.” Total private health insurance spending rose 4.4% to $991 billion, accounting for one-third of total national health care expenditures.

Spending on retail prescription drugs was among the fastest-growing categories, increasing 12.2%, as new treatments for hepatitis C and some cancers were introduced, according to the report. Drug spending accounted for $297.7 billion, just under 10% of the total.

The largest spending category was hospital care (at $971.8 billion, up 4.1%) while spending on doctors and other clinical services rose 4.6% to $603.7 billion.

Richard Frank, the assistant secretary for planning and evaluation at the Department of Health and Human Services, said the cost growth will probably slow after this year’s gains, noting that per-person spending increased 3.2% for individuals with private coverage and 2.4% for those in Medicare, while falling 2% for Medicaid recipients.

Government actuaries have estimated that spending will rise an average of 5.8% a year over the decade through 2024.

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