U.S. Health Spending Tops $3 Trillion

The Largest Health Spending Rate Increase Since 2007

U.S. Health Spending Tops $3 Trillion
January 27, 2016

So much for controlling medical costs. According to the Department of Health and Human Services report on trends in spending that was recently published in Health Affairs, health-related spending in the U.S. topped the $3 trillion mark in 2014. This equates to $9,500 for every man, woman and child in America. To put the spending into further perspective, total government spending in 2014 was $3.5 trillion.

Health-related spending increased by 5.3% in 2013, reversing the historically low increase of 2.9% in 2013. It equaled 17.5% of America's gross domestic product (GDP) for the year. Federal health spending accounted for almost $844 billion of the total, representing an 11.7% increase over 2013. Such a rise was predicted and somewhat inevitable, given that the Affordable Care Act (ACA) was designed to lower the number of uninsured Americans as much as possible. Medicaid expansion alone tripled its rate of spending increase — 18.4% in 2014 versus 6.1% in 2013.

Spending on prescription drugs experienced a sharp increase in 2014. The $297.7 billion total was an increase of 12.2% over 2013 values. The ACA plays some role here as well, since greater coverage and use of the medical system means more total prescriptions. Prescriptions did increase by 1.8% in 2014 — but the majority of the spending change was due to price increases. Specialty drugs accounted for much of the increase, with the new hepatitis C treatments accounting for $11.3 billion alone.

Health insurance companies have been quick to blame the ACA. UnitedHealth Group has already lowered profit estimates for the future while pointing a finger at the effects of the healthcare law. While acknowledging that healthcare costs have increased significantly, officials from the Obama administration are unapologetic about the effects of the ACA.

Acting administrator of the Centers for Medicare and Medicaid Services (CMMS), Andrew M. Slavitt, points out that even with the increase in health care coverage, the growth rate of health care costs is still "below the level in most years prior to the coverage expansion." It is true that 2013 represented an anomalous low in spending increases, so perhaps we are seeing growth rates reach equilibrium. Slavitt also notes that out-of-pocket health care costs increased at a relatively low rate, although they almost reached $330 billion in 2014.

Even the Medicaid spending increases can be put in a positive context. While it's true that expansion of coverage produced the greatest rate of Medicaid spending growth since 1991, spending per beneficiary actually decreased by 2% to $7,520.

On the other end of the age spectrum, Medicare spending increases pushed their costs up to 20% of all healthcare expenditures. Medicare spending increased 5.5% in 2014 compared to a 3% increase in 2013, and spending per beneficiary increased by 2.4%. It seems likely that with the aging of the Baby Boomer generation, Medicare costs are likely to continue to rise and will be among the most difficult to control.

Logically, as the ACA closes the gap in the uninsured rate, health spending should level out toward a rate of increase that is more representative of natural population growth and increased use due to a higher number of insured Americans. This may happen, but it is also worth remembering where the "affordable" in the ACA comes into play. Even with affordable premiums — and that is a highly arguable point as well — the ACA does not guarantee that overall health spending will come down. It will be interesting to see how the spending ratio shifts along with spending totals over time.

Photo ©iStock.com/kurashov

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Steffanie | 01.27.16 @ 18:01
I am not surprised the amount is increasing. The healthcare plan is a farse and not helping at all.
Nancy | 01.27.16 @ 18:02
It will be interesting to see how these numbers change in the next few years as Obamacare settles in.
Carla | 01.27.16 @ 18:02
Medical costs are ridiculous right now. I can't remember having to pay so much out of pocket. It has really put us in a bind.
Sara | 01.27.16 @ 18:02
Really not surprised at all. Though really interested to see what will happen in a few years when the forced obamacare is in full effect.
irene | 01.27.16 @ 18:03
Everything has gone up including the cost of our insurance. My husband got a raise but we don't even see any of the money because they take it straight from his check to the health insurance
Alec | 01.27.16 @ 18:04
Obamacare knocked out a bunch of other insurance companies and made a lot of people unable to afford insurance or qualify for medicaid/medicare so it's no wonder the numbers have jumped. I'm hoping to see Obamacare done away with in the near future so we can fix the healthcare system without fining people thousands of dollars a year for not being able to afford their own insurance.
STOKES | 01.27.16 @ 18:04
I paid a lot out of pocket in medical costs last year. Some of it is there are so many people on healthcare that didn't have coverage before.
Heather | 01.27.16 @ 18:05
The cost of healthcare is crazy. You'd think they would be able to have more reasonable costs and to think people are paying more now than ever just for coverage.
Amanda | 01.27.16 @ 18:08
I don't have and refuse to get health insurance with the prices that are offered. My wife makes too much to get a affordable rate compared to the government and I refuse to pay $300-400 a month just for me. I have no hospital bills, doctor bills, and I have always paid them in full. This year I will get hit with the fine, but that's still ok with me, as it's still cheaper than paying high premiums all year for nothing when the deductable is so high.
Ambar | 01.27.16 @ 18:10
I think this is a multisectoral issue. As long as people eat like they do and live how they do, that amount will increase every year. Prevention is the key.
Tina | 01.27.16 @ 18:11
This is disheartening. Though after the year of medical bills my family has experienced, I'm sure it's 100% right. I wish someone knew the answer... everyone should be able to take care of their health.
iwillbehappymore9 | 01.28.16 @ 05:46
We need a single payer health care system (universal health care) for ALL. Many middle class people can't afford their private insurance’s high deductible plans, even though they have private insurance. We don't need expanded Obama Care either. The healthcare industries’ billionaire CEOs (hospitals, health-insurance, pharmaceutical organizations) who have grossly inflated, or take margined medical costs for their greed, are killing people who can’t afford to go to the hospitals, can’t take regular exams or purchase drugs. Others go bankrupt as a result of their medical bills. ------- The U.S. spends more on health care (both per capita and as a percentage of GDP) than any other developed country, according to a 2015 report from the Organisation for Economic Co-operation and Development. Per person, the U.S. spends about $8,700 on health care every year — more than twice as much as France ($4,100) and the organization average ($3,400). And yet, by many measures, health outcomes in the U.S. are worse. When compared with other developed countries, the U.S. has below-average life expectancy, above-average obesity, fewer doctors and yet higher spending on advanced tests and equipment like MRIs. ------ MyInforms.com (Actually, under Bernie's plan paying more in taxes would still be much cheaper than the current healthcare premiums for middle class. Bernie Sanders will cut out the huge profit margins collected by the healthcare providers and the U.S. will be like other developed countries and help the majority of their people, not only the billionaires.) We have to pay TAXES to get Universal Health Care without margin by Healthcare industries. We will all pay far less if we cut WASTEFUL MILITARY spending and the billionaires have to pay their fair share of the money they are hiding in TAX HAVENS. The American government has to pay the "true cost" via taxes, NOT the inflated costs charged by the private health companies (we don't need their margin costs), and hospitals like other developed countries have.
$commenter.renderDisplayableName() | 12.01.20 @ 18:48