Policy

Study: Health Spending Rose 5.8% in 2015

Federal government now the biggest purchaser of medical services

The federal government rose past private households last year to become the nation’s biggest purchaser of health care, due in part to the expansion of the Medicaid program, according to a study released Friday. The findings comes as Republicans prepare plans to scale back the government’s role in securing health care for Americans.

The Centers for Medicare and Medicaid Services released the latest figures from the National Health Expenditure survey, which since 1960 has provided annual snapshots of this spending. The total tab for health care in the United States rose by 5.8 percent last year to $3.2 trillion. The federal government’s share of this spending grew at a faster rate than did other major segments, jumping by 8.9 percent last year to $918.5 billion.

Federal spending thus topped that of the previous largest purchasing segment, private households, a category that includes consumers’ insurance premiums and out-of-pocket medical expenses. Household medical spending rose by 4.7 percent to $886.8 billion last year. Spending by the third-biggest sponsor of health care, private businesses, rose 5.3 percent to $637.5 billion. The tab paid by state and local government rose by 4.6 percent to $547.7 billion.

[Interest in Obamacare Coverage Surges With Arrival of Trump Era]

Even beyond the partisan debates about the 2010 health law, members of Congress will face pressure to address rising medical bills for many Americans.

Health care spending in the United States is rising at a faster rate than nation’s economic growth, which gained about 3.7 percent last year. That's a change from four to six years ago when annual gains in both GDP and health spending hovered around 3.5 percent to 4.1 percent, according to the new CMS research. Health Affairs will publish the CMS estimates in January.

Health care spending last year resumed rising near historical levels after a significant dip linked in part to the 2007 recession. Annual growth in the national health expenditures slipped from 6.5 percent in 2007 to a low of 2.9 percent in 2013, according to CMS data. Growth then rebounded to 5.3 percent in 2014.

A bump in the costs of prescription drugs is helping fuel growth in health care spending, as is the recent expansion in the number of Americans covered by health insurance programs, the CMS researchers said.

“While the 2014–15 period is unique, given the significant changes in health insurance coverage that took place, health spending is projected to increase as a share of the overall economy over the next ten years and will be influenced by the aging of the population,” wrote Anne B. Martin, Micah Hartman, Benjamin Washington and Aaron Catlin, who work in CMS’ Office of the Actuary, in the paper.

Policy experts and Hill staff of all political stripes may look to CMS’s data on national health spending to bolster their arguments for the looming battles on federal policies. The politics around changes to Medicaid, the federal-state program for the low-income, could prove somewhat thorny. Republicans have long argued for repealing the 2010 health law, which expanded Medicaid and created subsidies to help Americans with low incomes buy insurance.

Yet a Medicaid repeal could end funding for many states represented by GOP lawmakers in Congress. Some 20 Senate Republicans and 120 more in the House represent the 32 states, including the District of Columbia, that opted to change to eligibility requirements to allow more people to enroll in Medicaid.

The nation’s health insurance landscape changed markedly as major planks of the 2010 health law took effect. About 10.3 million more people enrolled in Medicaid in the 2014-2015 period, while 9.7 million gained health insurance, the CMS researchers noted in their paper.

The percentage of people with health insurance stood at 90.9 percent in 2015, up from 85 percent in 2009.

The CMS research also may add to the debate on drug prices. Many lawmakers in recent months expressed an interest in helping Americans afford medicines.

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National spending on prescription medicines rose 9.0 percent to $324.6 billion in 2015. That marked a drop from the 12.4 percent increase in 2014 due in part to the introduction of costly new hepatitis C drugs. Still, the gain in drug spending last year was notably higher than the 0.1 percent to 2.3 percent annual gains seen in the early 2010s, when several blockbuster medicines lost patent protection. The CMS researchers noted that recent successes of the pharmaceutical industry are helping drive this spending.

“In 2015, forty-five new drugs were approved, more than in any one year over the past decade and more than the forty-one in 2014— when new drugs for the treatment of rare diseases and cancer were introduced,” the CMS researchers wrote.

Drug spending for federal health programs has continued to rise, even after the sudden jump caused by costly medicines for hepatitis C. The introduction of Gilead Sciences Inc.’s Sovaldi and rival medicines for the liver-damaging viral infection took a hard toll on Medicaid budgets in 2014. Drug expenses for Medicaid spiked 25 percent in 2014, the highest rate since 1986, the CMS researchers said in their paper. Medicaid’s tab for prescription drugs then rose 14 percent last year.

Drug spending for Medicare, the program that covers seniors and people with disabilities, rose by 11 percent last year, following a 14.5 percent gain in 2014.

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