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Healthcare Spending Trending Upward in 2015

By: Nextech | July 30th, 2015

Healthcare Spending Trending Upward in 2015 Blog Feature

Healthcare spending in the United States is estimated to have hit as much as $3.1 trillion in 2014.  That roughly calculates to about $9,700 spent on healthcare for every person in the country. Compared to 2013, healthcare spending among Americans experienced a growth of 5.5 percent last year. This is the first time since 2007 that growth in healthcare spending has gone above five percent. 

This sudden spike, which far exceeds most predictions, is largely attributed to the passage of the Affordable Care Act. Why? Because well over 8 million people signed up for health insurance coverage under the ACA between October 2013 and April 2014 open enrollment period. In the 2015 open enrollment period, from November 2014 to February 2015, another 11.7 million signed up for health insurance through the ACA. 

The amount of uninsured Americans has dropped to a record low of 11.4%, as of the first quarter of 2015. This seems to be translating into more people going to the doctor, which means more spending.

Another contributor to this spike in healthcare spending comes from a 12.6% increase in prescription drug spending. Growth like this hasn’t been seen by the pharmaceutical industry since back in 2002. This surge has been largely attributed to the introduction of a number of high-cost but desperately needed new drugs for conditions such as Hepatitis C… such as Sovaldi, which has a staggering price of about $1000 a pill. Sure, it can cure the condition, but it’s almost breaking Medicaid’s bank (which is not a big surprise, since that’s amounts to about $84,000 per patient).  In the first nine months of 2014, Sovaldi prescriptions cost the Medicaid program $1.08 billion.  Sovaldi also represented about 82% of all prescription drug spending for Hepatitis C patients in 2014.

While healthcare spending is seeing unexpected growth, things are expected to level off at the current pace. In 2015, healthcare spending is predicted to drop to 5.3%. Also, many analysts are expecting an average annual rise of 5.8% from between now and 2024. This rate is mainly being kept alive by the rising age of the baby boomer population, and the fact that more than 19 million of them will be qualifying for (and likely enrolling in) Medicare over the next decade or so.

While these increases are positive, they are still not at pace with those of the past. This is because fewer and fewer Americans pay out-of-pocket for healthcare expenses these days. Why? Well, programs like the ACA and employer-sponsored health insurance programs may lead to more people being insured, but they also often come with high deductibles… which means less people are willing to use them unless absolutely necessary.

So the good news is that annual growth for healthcare spending is not expected to fall below 5% again until at least 2024. The bad news, however, is that more and more of that spending will be coming out of the pockets of Medicare and Medicaid.  Some worry it might even bankrupt such programs. Whether or not that happens… well… only time will tell.