December 03, 2015 | FAH Hospital Policy Blog Team
Category: FAH News, General, Spending Slowdown
Recent headlines announcing a surge in health spending in 2014 and the end of the slowdown missed the mark and failed to see several encouraging signs in CMS’ annual report. First, it’s important to note that CMS’ actuary had earlier projected a 5.6 percent rate of growth for 2014, yet the actual number came in lower at 5.3 percent. While there is no argument that 2014’s growth rate is above the recent sustained run of historical lows, it is still well below the long-term growth that preceded the slowdown¹. The uptick comes as no surprise and was widely expected due largely to the Affordable Care Act’s coverage expansion. A big driver of the overall increase was a staggering increase in pharmaceutical spending. It was up an unsustainable 12.2 percent and must be addressed soon.
It’s also notable that the report included a significant downward revision of 2013’s already rock-bottom growth rate – a 19 percent drop from 3.6 percent when it was first published in December 2014² to 2.9 percent in this week’s report.
Let’s explore some of the other positives overlooked in the headlines:
- More Americans have health insurance coverage: 2014 was the year of the broad expansion of health coverage through the Marketplace and Medicaid, with millions more Americans becoming insured and an historic decline in the uninsured rate. This is exactly the outcome hoped for as ACA took hold. Not surprisingly, this pent-up demand lead to increased spending in 2014. Arguably, the growth rate may slow in 2015 as fewer Americans gain coverage in 2015 compared to the big jump in 2014.
- Per Enrollee Spending Remains Modest: For example, per enrollee Medicaid spending growth actually declined two percent in 2014, and Medicare increased only 2.4 percent.
- Hospital Spending Growth Was Impacted by Volume, Not Prices: Hospital spending increased 4.1 percent, less than the overall growth rate. This increase was largely related to an uptick in the use and intensity of services – again, not surprising given the substantial coverage gains. Particularly noteworthy is the near-historic low growth rate in hospital prices - 1.3 percent – a sharp decline from the 2.2 percent growth rate in 2013.
- Patient Out-of-Pocket Spending on Hospital Services Declined: Patients benefited from a 4.1 percent reduction in expenses such as copayments and deductibles.
To really understand the health care spending landscape, you need to look beyond the headlines. No one knows for sure what the future holds, but a deeper dive of the data in CMS’s report offers a much clearer, and in many ways, optimistic picture going forward. Hospitals continue to do their part in advancing payment and delivery reforms that increase efficiency, access, and quality.
¹National Health Expenditure Projections, 2013-23: Faster Growth Expected With Expanded Coverage and Improving Economy; Oct. 2014
²National Health Spending In 2013: Growth Slows, Remains In Step With the Overall Economy; Dec. 2014