Faster health spending growth attributed to ACA coverage expansion

Following several years of slow growth in U.S. health spending from 2008 to 2013, recent reports indicate that national health expenditure (NHE) growth returned to a more typical level of approximately 5.6 percent in 2014. This is considerably higher that the increase in gross domestic product. A recent analysis from the Robert Wood Johnson Foundation (RWJF) and the Urban Institute used two methods to determine if the growth in NHE was attributable to the Patient Protection and Affordable Care Act’s (ACA) coverage expansion or to see if there was another explanation for the rise in NHE.

In 2014, approximately 10.6 million Americans signed up for health coverage through the ACA-created health insurance marketplaces. The report, Has Faster Health Care Spending Growth Returned?, used two approaches to calculate the NHE growth rate in 2014 absent this ACA coverage expansion. The first method used historic data from the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary to project health spending in 2014 had the ACA coverage expansion not been implemented. This produced an estimate of national health spending growth of 3.5 percent in 2014 had there been no coverage expansion. The second approach used the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) to estimate the effect of new coverage on health spending in 2014 and subtracted this from CMS estimates of 2014 spending under the ACA. Under this approach, 2014 NHE growth was 4.2 percent.

Accordingly, RWJF and the Urban Institute concluded that “The bottom line is that the difference between 2014 NHE growth and the prior trend is largely, if not completely, attributable to the coverage expansion. Though this represents a real increase in spending because insured people use more medical services than uninsured people and because people with more comprehensive coverage use more services than those who are underinsured, this increase in spending should not be confused with an increasing rate of spending caused by increased intensity of service use per insured person or caused by higher prices being paid to health care providers per unit of service. Thus, there does not appear to be evidence at this time of an underlying spike in health spending that places us back on our historically troublesome growth path.”

SOURCE: http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000326_Has-Faster-Health-Care-Spending-Growth-Returned.pdf.

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