U.S. Health Care Expenditure Climbs Rapidly

The slow growth in U.S. health care expenditure of the past few years is poised to disappear as renewed vigor in the economy and a larger segment of the U.S. population with health coverage are driving greater health care utilization. The Office of the Actuary within the Centers for Medicare & Medicaid Services (CMS) reported that health care spending was up 5.5 percent in 2014 over the previous year. As a nation, we spent almost $3.03 trillion on medical care in 2014 or almost $9,523 per capita. This was the highest growth rate since 2008, the beginning of the recession. Analysts at CMS predicted that health care expenditure should rise to 6.0 percent for 2015 and hold steady through 2023.  By 2023, the annual national health care expenditure should reach $5.2 trillion. The study stated that by 2023, federal responsibilities for health care expenses should increase, while those for U.S. households should decline. Although the past few quarters marked climbing growth rates—which were preceded by annual growth around four percent—there is still some debate whether new federal policies like the Affordable Care Act are acting as cost inhibitors.  The 5.5 percent growth in 2014 hardly compares to the 7.3 percent annual average jump in national health care costs from 1990 through 2007.  However, the success of ACA and related policies is dependent upon supposed structural changes in the health care system that will produce lasting effects; if this latest trend is merely the beginning of an accelerating uptick in costs, it would appear that government intervention was unsuccessful. There are a number of reasons why costs for the country are climbing rapidly once again. The most important factor is the growing number of elderly. As the Baby Boomers age, almost 75 million Americans—many with serious, chronic health conditions—will require medical care. The American Hospital Association reports that almost 37 million of these will be managing at least one chronic health condition by 2030. Another contributing factor in the leap in health care costs is the greater access to prescription medications and the rapid rise in prices of many pharmaceuticals. While much of the public has characterized the hyperinflation of drug prices as rampant greed, there is a mounting public backlash which could help suppress price growth in the coming years. CMS predicts that the percentage of total health care expenditure devoted to prescription drugs, however, should remain at 9.4 percent through 2023. As many groups point fingers and deliver excuses for the new jump in U.S. health care expenditure, there is still the overarching problem of shrinking access to medical care for average American households. Troubling trends like burgeoning deductibles for employees as well as privately insured policyholders suggest that fewer Americans will be able to properly prevent and treat health issues. Even supporters of ACA recognize that the new laws have helped more Americans obtain health coverage, but the continuing upswing of costs will once again slam the door on that promise of increased access to health care.

Written by:  Robert Moghim, M.D., CEO- Moghim Medical Consulting Inc.

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