Health Care Cost Growth Up From Post-Recession Lows

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National health care spending grew more quickly last year than in other recent years, according to a new report by actuaries at the Centers for Medicare and Medicaid Services (CMS).

Spending grew by 5.5 percent last year, up from the average of 4.0 percent since the recession began in 2008. This increase was mostly expected due to expanded insurance coverage through the Affordable Care Act (ACA). The other primary contributor was prescription drug spending — which grew by 12.6 percent, compared to 2.5 percent in 2013.

The actuaries project an increase in cost growth throughout the next decade as the economy strengthens and the population ages. Yet they suggest that the average growth of 5.8 percent a year will still be “substantially lower than the average rates that were observed in the three decades prior to the recession.”  

The good news: For now, overall health care prices are barely growing, especially for physicians (0.5 percent) and hospitals (1.4 percent). Government policies to promote slow price inflation — like lower reimbursement rates, encouragement of high-deductible insurance and narrow provider networks — appear to be working.

The bad news is that policymakers are lagging in efforts to tame the growth in prescription drug prices and usage. That growth has generally been left out of the conversation on health care payment reform but the actuaries’ report shows that policymakers ignore it at the nation’s peril.

External links:
National Health Expenditure Projections, 2014–24 (Health Affairs)
Spending Growth Trends: Keeping An Eye On Spending Per Person (Health Affairs Blog)
The Campaign for Sustainable Rx Pricing

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