U.S. health care spending has risen at historically low rates recently, but is expected to pick up
Health spending in the U.S. had grown at historically low levels starting in 2008, likely due to a combination of the economic downturn and slow recovery and higher patient cost-sharing, as well as structural changes to the health system. Starting in 2014, health spending grew faster (4.5% per capita), particularly due to more people having health coverage from the ACA. Projections suggest that health-spending growth will continue at a higher rates than in recent years (averaging over 5% per year on a per capita basis) but is unlikely to reach the double-digit growth of previous decades.
Growth in prescription spending had slowed, but increased rapidly in 2014 and 2015
New specialty drugs are having an upward effect on spending, according to CMS, echoing other analyses by PwC, Express Scripts and IMS Health. In 2014, pharmaceutical spending is grew 11.4% on a per capita basis, driven in part by a surge in spending on Sovaldi and other specialty drugs, but analysis of CMS projections suggests growth in per capita drug spending will decelerate to 6.8% in 2015 and 5.9% in 2024.
Per capita out-of-pocket spending is projected to grow at very low rates in 2014 and 2015
The insurance coverage gains in 2014, and to a lesser extent in 2015, have given more people access to health care, which is likely increasing overall spending. Although total health spending picked up in 2014, per capita out-of-pocket costs grew slowly in 2014, as more people gained coverage under the ACA.
Per capita out-of-pocket spending dropped in 2014 for hospital care and physician services, by -4.8% and -0.4% respectively. However, per capita out-of-pocket spending on prescription drugs is estimated to have grown by 1.9% in 2014.
What may seem to be small differences in growth rates are very meaningful over time. Per capita expenditures are projected to grow from $10,125 in 2015 to $15,618 in 2024, which is an average annual growth rate of about 5 percent. If growth rates were 1 percentage point lower each year over that same period, per capita spending would be $1,290 lower than expected. If growth rates were 1 percentage point higher each year, spending would rise to $17,010 per person in 2024, which would increase total health spending by nearly $500 billion in 2024 alone and by about $2.5 trillion in the 9-year period.
Health spending is now projected to be lower than had previously been expected. The CMS 2010 baseline projections (which were published in 2011 and reflected changes as a result of the Affordable Care Act) put total national health expenditures at over $4.6 trillion in 2020, whereas the most recent projections (published in 2015) put 2020 total national health expenditures at less than $4.3 trillion. Over the course of the 11 year period, that amounts to a difference of nearly $1.9 trillion.
Longer-run trends are harder to predict, and this is particularly true in a time when the health system is changing rapidly. When CMS published the 2005 baseline projections (in 2006), health spending was then expected to reach more than $3.5 trillion by 2013 and over $4 trillion by 2015. Actual health spending has been much lower, at $2.9 trillion in 2013, and is now expected to reach $3.2 trillion by the end of 2015. Part of that difference was likely due to policy changes in the Affordable Care Act, which was not anticipated in 2006.