U.S. spending on healthcare in the Obamacare era is growing faster than inflation, on track to make up one-fifth of the economy by 2025.
The latest health spending data indicate that in the first few years of President Obama’s Affordable Care Act, there has been a moderate decline in the number of uninsured Americans, the government is paying for a larger share of healthcare, and spending is growing faster than right before the law but slower than in the decade preceding it.
Healthcare spending grew by nearly 8 percent annually in the two decades before the recession, but then slowed for several years. Now it’s ticking up again as more Americans have gained coverage under the healthcare law, growing by 5.3 percent in 2014 and by 5.5 percent last year.
Through 2025, national health expenditures are expected to grow by an average of 5.8 percent per year, driven by increases in economic growth, faster growth in medical prices and the aging U.S. population, according to data released by the Centers for Medicare and Medicaid Services published Wednesday in Health Affairs.
The data present a mixed bag for healthcare advocates, who have long bemoaned the country’s high uninsured rate and hefty spending on medical care, and for politicians who are deeply divided over Obamacare. Whether the law would help slow spending growth has been a heated topic, after Obama had promised his legislation would bend the cost curve.
The law has nudged the uninsured rate downward by 3 percent, so that now 27 million Americans lack coverage, about 8 percent of the population. While that’s a smaller expansion in coverage than originally projected by the Congressional Budget Office, it represents at least a partial victory for supporters of the Affordable Care Act. And spending still isn’t growing as fast as before the recession.
“The Affordable Care Act continues to help keep overall health spending growth at a modest level and at a lower growth rate than the previous two decades,” CMS Acting Director Andy Slavitt said. “This progress is occurring while also helping more Americans get coverage, often for the first time.”
But the U.S. continues to spend more per capita on healthcare than any other developed country, and there’s little sign that trend is slowing significantly. Spending per person equaled $7,629 in 2007 but $9,960 last year. It’s projected to exceed $10,000 for the first time ever, starting this year.
And federal, state and local governments are having to shoulder a greater share of the costs, as the healthcare law has expanded Medicaid to more Americans and provided others with subsidies. Forty-seven percent of health spending will be paid by governments by 2025 according to projections, almost 3 percentage points higher than in 2014.
Efforts by insurers to tamp down costs have led to broad complaints from patients that it’s increasingly hard for them to find a doctor covered by their plan.
“The expansion of narrow network insurance plans is one factor that is expected to keep cost growth and price growth lower,” said Sean Keehan, an economist in CMS’ Office of the Actuary.
At the same time, spending is expected to slow slightly this year to 4.8 percent, after the initial impact of the Affordable Care Act. And medical price inflation is continuing to grow at a historically low rate of 0.8 percent, with slower growth in payments to doctors and hospitals.
