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National Health Spending Growth Remains on Slow Track

The nation’s health spending continues to grow more slowly than before health reform, figures that the Centers for Medicare & Medicaid Services (CMS) released today show.  Total health spending by governments, private insurers, and individuals grew by 5.3 percent last year, well below the average 6.9 percent increase in the ten years before health reform.

Health spending growth in 2014 outpaced 2013’s 2.9 percent rate for two major reasons:

  • Thanks to health reform, the number of uninsured dropped by nearly 9 million, and the newly insured received health care services previously unavailable to them.  Medicaid spending growth accelerated due to health reform provisions expanding eligibility and boosting payments to primary care providers.  Enrollment in private health insurance also grew, largely due to enrollment in plans offered in the new insurance marketplaces.
  • Prescription drug spending grew sharply (by 12.2 percent in 2014, compared to 2.4 percent in 2013), due in part to several costly new drugs, including a treatment for hepatitis C.  This rapid increase highlights the need to do more to rein in drug costs as well as develop new payment methods that encourage the use of cost-effective treatments.  Making prescription drugs more affordable is the public’s highest health care priority, according to polling by the Kaiser Family Foundation.

The uptick in health spending growth in 2014, when health reform’s major coverage expansions kicked in, isn’t news.  For several years analysts have expected an increase in 2014 of roughly the amount reported today.

Moreover, the expansion of health coverage slowed the growth in consumers’ out-of-pocket health spending, from 2.1 percent in 2013 to 1.3 percent in 2014.  And households’ total health spending, including insurance premiums, fell as a share of national health spending.