Health Care Spending Grows At Its Fastest Rate In Seven Years Fueled By Insurance Coverage, Expensive Prescriptions

Healthcare spending in the U.S. grew at its fastest rate in seven years in 2014, driven primarily by greater insurance coverage through Medicaid and the Affordable Care Act, and by a 12.2 percent jump in spending on prescription drugs. Americans spent $3 trillion on healthcare in 2014, or about $9,523 per person, the Centers for Medicare and Medicaid Services said Wednesday. That represents an increase of 5.3 percent from 2013, which is the fastest rate of growth since 2007.

The CMS has tracked the total amount consumers spend on healthcare in the U.S. since 1960. The agency's calculations capture out-of-pocket costs as well as the price of premiums for private insurance and government-run programs, such as Medicare.

"Spending increased at a faster rate in 2014 than in 2013 for almost all major payers and services,” said Anne B. Martin, an economist at the CMS.

The agency also calculates total healthcare spending as a percentage of the nation's gross domestic product. As the economy grows and people earn more, they tend to use more healthcare, and so expenses often rise. In 2014, healthcare spending grew at a pace that was 1.2 percentage points faster than the economy and now represents 17.5 percent of the nation’s GDP. In 2013, spending represented 17.3 percent of the nation’s GDP -- a percentage that hadn’t budged since 2009.

CMS staff said the primary drivers of the increase are the expansion of government-run Medicaid, which is now accepting more low-income patients in states that have embraced it, and the growing number of patients who have gained insurance through the Affordable Care Act. Enrollment in private insurance plans rose by 2.2 million people in 2014, and 7.7 million more people signed up for Medicaid that same year, which boosted the program’s spending by 11 percent.

The high cost of specialty cancer treatments and new hepatitis C drugs, such as Harvoni and Sovaldi by Gilead Sciences, which were originally listed at prices as high as $1,000 per pill, have also raised spending, the CMS said. Drug companies and industry groups argue that most patients receive these medicines for far less than the list price through insurers and price discounts. Still, prescription drug spending jumped by 12.2 percent in 2014 to $298 billion, compared to a rise of 2.4 percent in the year prior. This marked the largest increase in prescription drug spending since 2002.