US Healthcare Spending Accelerates, Driven By Obamacare, Aging Population, Improved Economy And Expensive Drugs

After years of relatively steady increases, the growth rate in American healthcare spending is accelerating again. Medical spending grew at a rate twice that of the economy in the second quarter of 2015, an advance estimate published Thursday by the Bureau of Economic Analysis at the U.S. Commerce Department showed. Those findings came on the heels of a separate report predicting that healthcare spending will rise significantly in the coming decade.

Compared to the same quarter in 2014, healthcare spending rose by 4.9 percent, while the economy grew by 2.3 percent, the Commerce Department’s analysis showed. That specific increase is one part of a broader trend showing that healthcare spending is picking up and is unlikely to slow down anytime soon.

Multiple factors are fueling this trend. The Affordable Care Act, the 2010 law that overhauled the U.S. healthcare landscape and helped nearly 17 million people gain health insurance, is one. New, expensive drugs for complex diseases like hepatitis C, cancer and multiple sclerosis, as well as rising prices for medical care more broadly, are also expected to boost spending, said a report published in the July issue of Health Affairs and written by officials at the Centers for Medicare and Medicaid Services.

Another driver of ever higher spending is America’s aging population. Toward the end of the coming decade, nearly 40 cents of every dollar spent on healthcare will go to beneficiaries of Medicare and Medicaid -- large, primarily government-funded insurance programs. The costs for patients in these programs tend to be higher than average, the Health Affairs article explained.

The growth in healthcare spending had hovered at about 4 percent, a historic low, in the years since the 2008 recession. The first year to break that trend was 2014, when healthcare spending increased by 5.5 percent.

From 2014 to 2024, growth in healthcare spending is expected to average 5.8 percent per year, so that within 10 years, 19.6 percent of the U.S. gross domestic product, or more than $5 trillion annually, will consist of spending on healthcare, the Health Affairs article said.

Some suggest that another reason healthcare spending is rising is that the economy is gradually improving and employment is more robust. As a result, people are spending more on healthcare, Thomas Getzen, a health economist, told Modern Healthcare.

The Commerce Department’s estimate, released Thursday, was based on “source data that are incomplete or subject to further revision by the source agency,” it cautioned, and the bureau said that an estimate based on more complete data would be released Aug. 27.