Revenue Cycle Management Blog | GroupOne Health Source

Healthcare Spending Escalates in First Quarter

Written by Kaitlyn Houseman | May 5, 2014

New federal data finds that health care spending increased by 9.9 percent in the first quarter of 2014. According to data released Wednesday by the Bureau of Economics Analysis the recent rise in healthcare spending is the biggest jump since the third quarter of 1980.

USA Today's Paul Davidson stated "the higher health outlays made up more than half of last quarter's 3% increase in consumer spending and helped prop up a generally weak economy. The economy grew just 0.1% in the quarter and would have shrunk by about a percentage point if not for the surge in health-related spending."

The Affordable Care Act (ACA) mandate could be the cause of a majority of the increase due to Americans being able to visit doctors and hospitals however, it is unclear how many of the estimated 8 million Americans who signed up for health insurance under the mandate were previously uninsured.  Due to the extended deadline of April 15th for many people to sign up for health insurance because of the ACA, economist Omair Sharif of the Royal Bank of Scotland predicts further increases in health spending during the second quarter.

Other factors that could continue to lead to increased health care spending include faster job growth.  "Faster job growth is leading to more health-related spending for many Americans who went without insurance or used few medical services while unemployed," Dan Mendelson, CEO of consulting firm Avalere Health says.

Also, Mendelson says, upward pressures on health care costs, such as the growth of expensive high-tech treatments, are re-emerging after falling for several years. Costs had fallen because the ACA gave hospitals incentives to be more efficient, and insurance companies shifted more costs to patients, prompting many to visit doctors sparingly, he says.

USA Today also reported the amount consumers pay for health care also may drift higher. Although annual medical inflation has fallen since the recession and was well under 1% in March, Paul Sales of Capital Economics expects fewer patents to expire over the next two years leading drug prices to increase. The decline was partly due to the expiration of a large number of drug patents in 2011 and 2012, causing expensive branded drugs to be replaced by cheaper generics.

According to a new report from the IMS Institute for Healthcare Informatics, Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in 2013,finds total spending on medicines increase 1.0% on a real, per-capital basis in 2013. The total amount spent on medications hit $329.2 billion last year, up 3.2% nominally and up from the 1% decrease in 2012.

The ways in which patients will utilize their insurance in the future will depend on their ability to pay, IMS Health research director Michael Kleinrock says.

“A patient’s decision to seek health care and use whatever health care they wind up using comes down to their ability to pay and the costs,” he says. “We see a clear rise in deductibles, and in plans with deductibles and a clear rise in consumer-driven health plans.”

Kleinrock notes that 20% of those with coverage have high-deductible plans, and that 78% of all insured people have a deductible. What’s more, 38% of those deductibles are over $1,000.