Medicare spending is lower than it could have been but still rising

Medicare spending for personal health care expenditures was $473 billion lower between 2009 and 2014 than it would have been if the growth rate between 2000 and 2008 had continued into 2014. If the slowed spending growth continues for 2015, the savings could reach $648 billion—a sum greater than all Medicare spending for 2015. The HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) Report, which contained the findings, noted that, despite the lower spending for personal health care expenditures under Medicare, national health care spending increased moderately in 2014 by 4.3 percent per person.

Changing growth

The rate of national health care spending growth per person was on a downward trajectory between 2002 and 2012. For example, between 2009 and 2012, the average growth rate in per enrollee spending for the Medicare program was 2.3 percent, whereas the average growth rate for the years 2000 through 2008 was 6.3 percent. ASPE attributed the slowdown to multiple factors including the great recession, expiring drug patents, uptake of generic drugs, and changing state and federal policies. In subsequent years, the country experienced significant gains in health insurance coverage as a result of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In 2014, the first year of operability for the ACA’s health insurance exchanges, per person growth rose to 4.3 percent, which, while an increase from previous years, is considered modest by ASPE on historical standards.

Transitory spending

The report suggests that the uptick in growth was likely caused by the sudden impact of the ACA’s expansion of insurance coverage and the introduction of new specialty drugs. ASPE projects that the spending increases will be transitory. For example, the report suggests that some spending increases could be caused by the pent-up demand for services that was addressed suddenly when individuals obtained coverage under the ACA. Additionally, spending on specialty drugs like those used to treat Hepatitis C skewed spending growth numbers significantly. For example, spending on prescription drugs would have remained the same between 2013 and 2014 without the introduction of new Hepatitis C drugs. However, due to the introduction of those drugs, prescription drug spending increased 4.5 percent between 2013 and 2014.