Workplace Issues

U.S. Spending On Health Care to Be Less Than ACA Estimated

The health-care reform law has contributed to the lower projections for the next four years, but so has a slow-growing economy.
Katie Kuehner-HebertJune 21, 2016

The United States is on track to spend $2.6 trillion less on health care between 2014 and 2019, compared with initial projections made right after the 2010 passage of the Affordable Care Act, according to an Urban Institute study released Monday.

Declines in spending in those four years on Medicare (-$455 billion), Medicaid (-$1.05 trillion), private health insurance (-$664 billion), and other health spending (-$456 billion) should also be “quite large,” the report said.

The healthcare reform law has contributed to the lower 2015 projections in several ways, the authors wrote.

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Medicare utilization rates are down; lower payment rates in Medicare may have affected payment rates by commercial insurers negotiating with hospitals and physicians; Medicare policies, such as financial penalties for hospital readmissions, may have spilled over to other payers; and premiums listed on the health insurance exchanges are below expectations because of strong competition, intense negotiations over provider payment rates, and narrow networks.

But the ACA may not be the primary reason for the drop in spending — the sluggish economy could actually be the real factor, according to the authors. When the economy rebounds, the reasons for the current drop in spending will be clearer, they said.

“If the ACA and other factors discussed above have contributed to slower spending growth in unmeasured ways, then slower growth may persist beyond current projections,” the authors wrote. “But if the economy was the primary driver of slower growth, then we should expect a return to faster growth with a robust recovery.”

The Urban Institute relies on data from the Federal Centers for Medicare and Medicaid Services. The study was funded by the Robert Wood Johnson Foundation.