WASHINGTON – The major expansions in health care coverage in 2014 called for by the Affordable Care Act will cause health care spending to grow by 7.4% that year alone – a rate two percentage points higher than would have occurred without the law, according to an analysis by economists from the Centers for Medicare & Medicaid Services.
Much of that growth will be driven by increased use of physician services (projected to grow by 8.5%) and prescription drugs (projected to grow by 8.8%) as an estimated additional 30 million Americans gain health coverage under the law, Sean P. Keehan and his colleagues from the CMS Office of the Actuary said at a press briefing today sponsored by the journal Health Affairs. Their analysis was published online in that journal (Health Aff. 2012 June [doi:10.1377/hlthaff.2012.0404]).
The coming growth in health spending is tempered by the current economic climate, according to the analysis. Estimated spending growth for 2011 is 3.9% – the same rate seen in 2010 and just above the historically slow growth rate of 3.8% in 2009.
"The recent recession and the modest economic recovery have played a role in our projection of near historic lows in health spending growth through 2013," Mr. Keehan said.
The economists noted, however, that once the health care system absorbs those newly insured via the state health insurance exchanges and Medicaid expansion in 2014, growth in spending is projected to stabilize.
"Once you have [the population from the coverage expansion] in, the growth rate of national health spending is projected to be fairly similar with or without the Affordable Care Act," Mr. Keehan said.
Their analysis is based on a fairly uncertain future, however, as the Supreme Court deliberates on the constitutionality of the ACA.
The projections also assume the approximate 30% cut in Medicare physician payment under the Sustainable Growth Rate formula will go into effect Jan. 1, 2013, and will remain in effect. This would bring the growth in Medicare spending down to 1.3%, from 5.9% in 2012.
Medicare costs are projected to grow every year, as more baby boomers qualify for benefits. Those costs will be offset partially by cost-saving provisions under the ACA, said CMS economist Gigi Cuckler.
"The growth rate in 2014 is largely influenced by the coverage expansions, but once you go into 2015 through 2021, you still have continuing effects of the coverage expansions," she said. "However, you have a lot of Medicare cost-savings provisions also in play here that are bringing down the costs at this time."
The analysis is similar to that released last July by CMS.
The projections are based on economic and demographic assumptions from the 2012 Medicare Trustees Report.