New projections by federal government actuaries suggest that the nation’s five-year run of tiny increases in health care spending is coming to an end.
The projections released on Tuesday estimate that health spending will average 5.8 percent a year through 2024, higher than the 4 percent annual growth measured between 2007 and 2013. That means health spending will be growing faster than is expected for the overall economy, but it isn’t expected to grow as fast as it did in the years before the Great Recession.
The actuaries argue that the economy explains most of the recent slowdown — and that, in turn, is why they are expecting a bounce-back in coming years, as the economy continues to grow. But they do not believe that health spending will return to the high levels experienced before the recession — an average of 9 percent a year over three decades.
In many ways, these numbers are no surprise. The insurance expansions of the Affordable Care Act, which have enabled millions more Americans to obtain health coverage, have led those people to visit doctors, fill prescriptions and otherwise treat their illnesses. Those newly insured customers were always expected to push health spending up. These estimates differ little from similar projections released last year.
But the real question now is whether, once those people are absorbed into the system, health spending will reset to the slow rate of recent years or return to the longer-term pattern of high growth.
The recent health spending slowdown has cheered and befuddled health economists over the last few years. They are uncertain of its precise causes and its longevity. Many believe that slower growth in health spending is an aftershock of the recession. But many also thought the slowdown reflected real changes in the practice of medicine that had made it safer and less wasteful.
The published numbers are projections, and some health economists are more optimistic. Charles Roehrig, a vice president at the Altarum Institute, a research group that studies health spending, said he believed the actuaries might have exaggerated the country’s health spending trajectory. “I think that if we get back onto the path we were on before the recession, which was a steadily declining excess growth rate, that we ought to be able to get below” the estimate, he said.
When spending on health outpaces the growth of the overall economy, it can crowd out other priorities, for individuals, businesses and government budgets. That’s why the future path of health spending is so closely watched. It may take years before new Obamacare enrollees settle into the system and the long-term trend becomes clear.
The expansion of coverage in 2014 resulted in estimated increases in spending by the state-federal Medicaid programs, which now provide insurance to more low-income Americans, and in private insurance, where many people obtained insurance through their jobs or the new insurance marketplaces.
The actuaries did not estimate that the prices paid for health insurance or for medical services increased substantially. The biggest factor was the sheer number of new people using the health care system.
But spending on prescription drugs did jump, mostly because of the introduction of very expensive but effective treatments for hepatitis C, a liver disease. Drug spending, which had increased by 2.5 percent in 2013, increased by 12.6 percent in 2014, according to the projections.
The Obama administration has started a series of demonstration programs in Medicare, aimed at improving health care quality while lowering costs. But most are small and unproved, and the actuaries said they did not consider them when preparing the estimates.
“It’s still too early to determine whether or not these demonstrations will have a lasting effect on health spending,” said Gigi Cuckler, an economist at the Centers for Medicare and Medicaid Services, in a conference call with reporters.
From New York Times, by Margot Sanger-Katz, July 28, 2015