Healthcare spending, driven by prescription drug costs, outpaces economy

Healthcare spending grew 2.1 percent faster than the overall economy in 2015, according to a report released Friday by the Centers for Medicare and Medicaid Services.

Prior to the passage of the Affordable Care Act in 2010, healthcare spending increased at an even faster rate, by 2.8 percent annually between 2000-2009.

Per-enrollee, spending increased by 4.5 percent for private health insurance, 1.7 percent for Medicare, and 3.8 percent for Medicaid, CMS said.

In 2015, per-capita healthcare spending grew by 5 percent and overall health spending grew by 5.8 percent, according to the study by CMS's Office of the Actuary.

Even as 20 million people gained coverage, per-enrollee spending growth in private health insurance and Medicare continue to be well below the average in the decade before passage of the Affordable Care Act, according to CMS's Acting Administrator Andy Slavitt.

"As millions more Americans have obtained health insurance, per-person cost growth remains at historically modest levels," Slavitt said in a released statement. 

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Expenditure growth in 2015 was primarily the result of increased use of services, as well as a 9 percent increase in spending on prescription drugs.

Retail prescription drug spending continued to outpace overall health expenditure growth in 2015, increasing 9 percent to $324.6 billion, after rising 12.4 percent in 2014. Growth in prescription drug spending was faster than that of any other service in 2015, CMS said.
In 2013, prescription drug spending rose by 2.3 percent.

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Medicare prescription drug spending continued to grow by double digits with an 11 percent increase in 2015, following a 14.5 increase in 2014.

The share of the population with health coverage increased from 86 percent in 2013 to 90.9 percent in 2015.

Per-enrollee private health insurance spending increased by 4.5 percent in 2015, compared to average growth in per-enrollee spending of 7.4 percent during 2000-2009.

Overall, private health insurance expenditures, which are 33 percent of total healthcare spending, reached $1.1 trillion in 2015, an increase of 7.2 percent. This reflects enrollment due to the Affordble Care Act and an increase in the enrollment in employer-sponsored plans.

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Per-enrollee Medicare spending increased by 1.7 percent, about the same rate as in 2014 and below the average annual growth in per-enrollee spending during 2000-2009 of 7 percent.

Medicare spending, which represented 20 percent of national total healthcare spending in 2015, grew 4.5 percent to $646.2 billion, slightly slower than the 4.8 percent growth in 2014 even as the leading edge of the baby boom generation joined Medicare.

The 2015 rate of growth reflected mixed trends among services compared to 2014 as Medicare hospital spending growth slowed and nursing home and home health care spending grew faster.

Overall Medicaid spending and enrollment grew at a slower rate in 2015 than in 2014 with per-enrollee Medicaid spending increasing 3.8 percent. Medicaid spending, which totaled $545.1 billion, accounted for 17 percent of total spending on health care. Similarly, growth in Medicaid enrollment slowed to 5.7 percent in 2015, significantly lower than the 2014 increase of 11.1 percent.

In 2015, out-of-pocket spending grew 2.6 percent, compared to 4.6 percent from 2000 to 2009.

From 2008 through 2015, average annual growth of out-of-pocket spending was 1.9 percent, lower than the average annual growth in overall health spending of 4.3 percent.

The share of out-of-pocket spending of total health expenditures fell from 13 percent in 2007 to 11 percent in 2015.

Twitter: @SusanJMorse