Health spending spiked by more than 5 percent last year as Obamacare took full effect, according to a new government analysis Wednesday that said the low-growth trend that had prevailed for most of President Obama’s time in office changed as new prescription drugs came on the market and Americans started using more services.
Mr. Obama had enjoyed historically low increases averaging 3.7 percent a year during the first five years or his tenure, but spending rose 5.3 percent, to reach $3 trillion, in 2014, the Centers for Medicare and Medicaid Services estimated.
The increase challenges claims that the Affordable Care Act would help lower overall health costs in America by pushing patients to get care earlier, and cheaper, rather than going to emergency rooms as an expensive last-resort option.
Instead, actuaries say the health reform was a key driver in the uptick, as millions of new patients with expanded coverage predictably led to a greater demand for care.
The administration argued that was a good thing, and said the cost increases would have been even worse without Obamacare.
“Millions of uninsured Americans gained health care coverage in 2014,” CMS acting Administrator Andy Slavitt said. “And still, the rate of growth remains below the level in most years prior to the coverage expansion, while out-of-pocket costs grew at the fifth lowest level on record.”
Wednesday’s report is the first to offer a snapshot of Obamacare’s early impact on overall health spending, and it comes amid other dark omens for the law.
The nation’s largest insurer, UnitedHealth Group, recently said it is losing money on Obamacare’s health exchanges and may pull out entirely by 2017, while more than half of the law’s 23 co-ops will not offer plans in 2016.
The nonprofit co-ops were supposed to offer a consumer-driven competitor in the new marketplace, but a dozen of them were doomed by an inability to grab market share and lower-than-expected federal payments designed to minimize their losses.
When Mr. Obama pushed Congress to pursue health reforms in 2009 and 2010 he set goals of broadening coverage to more people, allowing those who liked their plans to keep them, and trying to control the ever-expanding share of health costs as a percentage of the economy.
Early reforms included allowing those up to age 26 to stay on their parents’ plans, and requiring insurers to offer rebates if they did not spend at least 80 percent of premiums on health services instead of administrative costs.
But the biggest reforms started in 2014, when consumers were required to have coverage or else pay a penalty. Americans with incomes less than 400 percent of the poverty level who didn’t have plans through their jobs were given tax breaks to help them buy insurance on the Obamacare exchanges.
Also, about half the states also expanded Medicaid to those making up to 138 percent of the federal poverty level, with the federal government covering the costs.
As a result, federal health care spending grew by 11.7 percent in 2014, compared to 3.5 percent in 2013, meaning government spending outpaced the growth faced by all other sponsors of health care.
The uptick led to a 2-percentage point increase in the federal government’s share of overall health spending, from 26 percent in 2013 to 28 percent in 2014.
CMS’s report, published in the journal Health Affairs, says Obamacare isn’t the only culprit for increased spending. It also pointed to spending on retail prescription drugs — particularly to treat Hepatitis C — that reached nearly $300 billion in 2014.
The 12.4-percent increase comes after a relatively cool, 2.4-percent increase in 2013, making it the sharpest spike since 2002.
Recent polls suggest Americans consider the high cost of prescription drugs to be the country’s most pressing health concern, and lawmakers are taking notice.
A bipartisan pair of senators released a report Tuesday that said a manufacturer of an effective treatment for Hepatitis C put profits before patients when it demanded $1,000 per pill, or $84,000 for a full course of treatment.
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.
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