Health Spending – Is It Raining?

By January 7, 2014Health Care

Yesterday, the Administration rushed to claim that the Affordable Care Act has played a part in health expenditures slowing over the last four years. Such a claim is about the equivalent of pouring a glass of water on the ground and telling us it rained.

As a nation, we spend $2.8 trillion a year on healthcare products and services. This includes hospital stays, doctor visits, medicines, devices, biologics, nursing and home healthcare and over-the-counter consumer products. The Affordable Care Act, though impactful on the market in many ways, has by design had little to do with the overall trend line in healthcare spending since its passage. The actuaries at CMS acknowledge in their report that the ACA has had a negligible effect on healthcare spending to date, but it’s hard to believe that will be true in future years.

What we have always known about the ACA is that its impact will be felt in the out-years, which we’re entering right now. The data published yesterday is from 2012 and the full effect of the law was still two years ahead of us. It’s 2014 now and due to delays announced last year in forming the SHOP exchanges and the employer mandate, the law won’t be fully implemented until 2015. What we have seen so far in 2014 does not bode well for claims of reducing the cost of healthcare – premiums are increasing dramatically for many people in the individual market. On the employer side, the NAM recently surveyed its members and more than 90 percent are seeing increases in premiums and roughly 77 percent view health costs as a primary challenge in the years ahead.

For now, it appears the sluggish economy has had more of an impact on aggregate health spending over the last four years than any other factor, which is perhaps the proof in the old adage – for every silver lining, there is a cloud. Contrary to some assertions, however, it did not rain.

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