Expansion of insurance coverage drove recent healthcare spending increases

As healthcare spending appears poised to rise in the coming years, a new study suggests that the recent upward bumps may be due to millions of more Americans gaining coverage as opposed to other market trends.

That's the conclusion of a new brief from the Robert Wood Johnson Foundation and Urban Institute. 

Healthcare spending rose 5.6 percent last year after several years of much smaller increases. Researchers used two modeling approaches to explain the increase. The first employs actuarial data from the Centers for Medicare & Medicaid Services (CMS). The second uses the Urban Institute's Health Insurance Policy Simulation Model to help determine what impact the expansion of insureds under the ACA had to spending trends.

The CMS data concluded that the spending increase should have been 3.5 percent overall, without taking the ACA expansion into effect. The Urban Institute's simulation forecast growth of 4.2 percent without the expansion. Both figures are close to the overall 3.9 percent increase in GDP.

"A major reason that health spending growth has increased recently is that more people are covered," said Kathy Hempstead, Robert Wood Johnson Foundation's director of coverage issues, in a statement emailed to the press. "While increased spending on specialty drugs is a concern, other health service prices appear to be holding the line."

Drug costs have been driving a significant amount of healthcare spending and cost increases. The CMS has forecast healthcare spending will grow an average of 5.8 percent per year between 2014 and 2024, with specialty drugs to treat diseases such as hepatitis C driving part of that increase. The Altarum Institute concluded that healthcare prices barely grew above 1 percent in May, but drug prices were up 5.3 percent.

To learn more:
- read the brief (.pdf)

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