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Morning Briefing

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Thursday, Dec 3 2015

Full Issue

Obamacare, Expensive New Drugs Drive Up 2014 U.S. Health Spending

Health spending last year grew by 5.3 percent to more than $3 trillion, which is the biggest jump since 2007.

Health spending in the United States last year topped $3 trillion — an average of $9,500 a person — as five years of exceptionally slow growth gave way to the Affordable Care Act’s expansion of Medicaid and private insurance coverage, and as prescription drug prices resumed their sharp climbs, the government said Wednesday. Health spending grew faster than the economy in 2014, and the federal share of health spending grew even faster, as major provisions of the Affordable Care Act took effect. Total spending on health care increased 5.3 percent last year, the biggest jump since 2007. (Pear, 12/2)

The return to more robust growth after a slowdown in spending had been anticipated by economists. Still, it is likely to add to criticism that the 2010 health law isn’t doing enough to rein in costs. The report, based on 2014 government numbers and published in the journal Health Affairs, follows five consecutive years where average spending growth was less than 4% annually. The rate of growth is closely watched because the Obama administration has initiated changes in health-care delivery to help restrain spending. The administration said the faster pace of growth is still below levels before the law, a sign the ACA is working. (Armour, 12/2)

For the Obama administration, it may signal the end of an unusually long lull in health care inflation that yielded political dividends. While the president's health care law has increased coverage, the cost problem doesn't appear solved. Even now, the Republican-led Congress is preparing to send a repeal bill to his desk. "From the political point of view, it's absolutely significant," said Robert Blendon, who follows public opinion on health care at the Harvard T.H. Chan School of Public Health. Critics will point to the report as authoritative evidence the health law is starting to raise costs. (Alonso-Zaldivar, 12/2)

Experts aren't predicting a return to double-digit increases in medical spending. But the latest trend underscores how difficult it will be for policymakers, employers and insurers to control healthcare costs going forward. The upswing could further squeeze American workers. Health insurance premiums and deductibles keep taking a bigger bite of their paychecks, as employers shift more healthcare costs to employees. (Terhune, 12/2)

The new CMS report sees a large increase in the growth in spending by private health insurance, which covered just under 190 million Americans in 2014, up from 187.7 million the year before. "Total private health insurance spending growth accelerated from 1.6 percent in 2013 to 4.4 percent in 2014, driven in part by the expansion of health insurance coverage under the Affordable Care Act," the report reads. Private health insurance companies spent $991 billion on patients in 2014, accounting for one-third of total national health care expenditures. (Fox, 12/2)

Another major driver of the increases was prescription drug spending, which grew more than 12 percent to $297.7 billion -- its largest annual increase in more than a decade. Anne Martin, an economist in the office of the actuary at CMS attributed the growth in part to a new generation of pricey hepatitis C drugs. Price hikes on brand name drugs also contributed, along with fewer savings on drugs whose patents expired. (Johnson, 12/2)

President Barack Obama and Democrats in Congress designed the Affordable Care Act to spend a lot of money to give more people health insurance so they could access medical care. The law seems to have succeeded on all three counts, and the results are showing up on America's national health care tab. (Young, 12/2)

This is part of the Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
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