Healthcare spending is on the rise again

Healthcare spending, which had been tempered in recent years by the fiscal constraints of the Great Recession, appears to be moving on an upward track for the long term.

Healthcare spending grew at a 5 percent annual rate in 2014, up from 3.6 percent in 2013, according to new data from the Altarum Institute's Center for Sustainable Health Spending. But the fourth quarter trend was particularly striking, with spending up by 6.2 percent.

Pharmaceuticals play an outsized role in this trend. Spending on prescription drugs rose by 11 percent last year, compared to 2.5 percent in 2013. Drugs to treat hepatitis C contributed as much as 4 percent to the overall trend growth, according to Altarum. Overall pharmaceutial prices grew by 3.8 percent last year.

The spending increase on hospital services in 2014 was just below 5 percent, while prices rose about 1.5 percent. The spending hike was below 3 percent for physicians and related clinical services, while prices inched up just 0.6 percent.

A separate report by the Robert Wood Johnson Foundation (which funds some of Altarum's spending and price research), noted that "the actual growth of 5 percent in health spending for 2014 is somewhat less than the Centers for Medicare & Medicaid Services forecast for the year which was 5.6 percent. However, again reflecting the late year acceleration in spending, the fourth quarter growth rate came fairly close to the full year projected rate."

However, the Michigan-based Altarum has advocated for a fairly moderate growth curve in spending and prices, and believes that spending will moderate during this year. "It seems likely that growth in the first half of 2015 will continue at around 6 percent, but Altarum expects a gradual decline over the rest of the year due to lower growth in prescription drug spending (spending for hepatitis C should level off) and less additional expanded coverage," the report said.

To learn more:
- read the Altarum report (.pdf)
- check out the RWJF report (.pdf)

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