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National Health Spending in 2014

By December 7, 2015Commentary

Arghhhh!!!  I am old so I don’t like reminders that another year has passed, but here we go again with another annual Office of the Actuary report on National Health Spending, this time for 2014.  (HA Article)  The headline is that spending increased to $3 trillion, or up 5.3%.  In 2013 the rate of growth was only 2.9%.  On a per capita basis, spending reached $9523 per person, or a 4.5% rise.  By payer category the fastest increase was in private health insurance, which went from a 1.6% rise in 2013 to a 4.4% increase in 2014; while Medicaid spending shot up from growth of 5.9% in 2013 to 11% in 2014.  Medicare spending also accelerated to 5.5% growth.  In absolute dollars, Medicare spending was $619 billion, Medicaid was $496 billion and private health coverage was $991 billion.  By service category, prescription drugs contributed extensively to the spending increase, growing 12.2%, while hospital spending rose 4.1% and physician services by 4.6%.  And you will be pleased to know that government administration costs rose 10.7%.  Decomposing the 4.5% per capita spending increase shows that .6% came from changes in the age and sex mix of the population, 1.8% from inflation in the cost of services and goods and 2.1% from utilization and intensity growth.  The main economic sources of the health spending were private businesses which paid $606 billion, households, which paid $844 billion, and governments which paid $1359 billion.

The Administration’s response was to say don’t worry, this is what we expected and results from the reform law coverage expansion.  But this is the same administration that told us that passing the reform law, including those coverage expansions, would greatly reduce the rate of health spending growth.  Not only is the Administration’s credibility shot, but there is no reason to believe that they have any real solutions to lessen the pain of continued health spending increases.  Other reports suggest that the rate of growth in 2014 is no accident and could be even higher in future years.  So, is GDP growing at 5.3%?  No, not even half that fast.  Is inflation rising that quickly?  Not even close.  How about personal income?  Nope, just a fraction of the increase.  You get the gist, this is not a good trend, especially for consumers and taxpayers.

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