CMS publishes 2014 National Health Expenditures

Total health expenditure increases as millions obtain coverage and the cost of prescription drug increases; spending growth remains at low rates as seen prior to the Affordable Care Act

Per-capita health spending increased by 4.5 percent in 2014 and overall health spending increased by 5.3 percent indicates a research by the Office of the Actuary at the CMS. These rates are less than the spending in most years before the introduction of the Affordable Care Act. Moreover, out-of-pocket spending by consumers has increased only by 1.3 percent in 2014, when compared to 2.4 percent increase in 2013 indicating the increase in the number of people with health coverage.

The findings note that the increase in spending since 2013 is basically driven by millions of new individuals with health insurance coverage as part of the Affordable Care Act and the rapid increase in prescription drug costs. The overall spending for prescription drugs increased by 12.2 percent in 2014  when compared to the 2.4 percent in 2013 which was due to the large spending for new medicines, especially for specialty drugs to treat hepatitis C. The spending has increased per enrollee by 2.4 percent for Medicare and 3.2 percent in private health insurance and decreased by 2 percent in Medicaid.

Acting Administrator of CMS, Andy Slavitt points out “Millions of uninsured Americans gained health care coverage in 2014,” “And still, the rate of growth remains below the level in most years prior to the coverage expansion, while out-of-pocket costs grew at the fifth lowest level on record.” The Affordable Care Act has given coverage to 8.7 million individuals in 2014. As a result, the share of insured population increased to 88.8 percent in 2014 from 86 percent in 2013 which is the highest since 1987.

In 2014, health care spending has undergone an overall increase of 1.2 percent points faster than the overall economy leading to a 0.2 percent point increase in health spending share of GDP from 17.3 percent to 17.5 percent.

A decade before the Affordable Care Act was put in place (2000 – 2009), health care expenditure increased by an average 6.9 percent every year which was 2.8 percent points faster than GDP. This year’s report reminds us that the industry must be vigilant in delivering efficient health care outcome to derive smarter spending especially when the cost is increasing in key care areas such as prescription drugs says Andy Slavitt.

Household and federal government accounted for major share of expenditure in 2014 which stood at 28 percent each. The expenditure of private business stood at 20 percent while that of state and local governments were 17 percent. The share of federal government increased since 2013 by 26 percent due to Medicaid expansion which is fully financed by federal government and the tax credits on health insurance premium.