Health Spending Gains as Obamacare Patients Use the Plans

Higher consumer spending on health services, increased prescriptions for costly medications and more elective surgeries suggests Americans are using the insurance they gained under Obamacare.

Consumer purchases of health services surged 9.9 percent at an annualized rate in the first quarter from the prior three months, the highest rate of growth since 1980, according to the Bureau of Economic Analysis. Health spending contributed 1.1 percentage points to total growth in gross domestic product, the most since quarterly records began in 1947.

The growth is likely the result of increased utilization under the Patient Protection and Affordable Care Act because prices mostly have been little changed. Health plans, pharmacies and hospitals say they are seeing the first signs of newly insured patients seeking medical care, including high-cost drugs and surgeries.

“It’s still pretty early for most of those newly insured to access a whole lot of health-care services, but some of them definitely are,” said Ceci Connolly, managing director of PricewaterhouseCoopers Health Research Institute in Washington. “This is definitely an increase in utilization, it appears, more than pricing.”

More than 8 million Americans have signed up for private health plans sold through the health law’s new insurance exchanges, and federal officials say another 3 million have been added to the Medicaid program for the poor since the start of the year. While the percentage of enrollments who lacked insurance isn’t known, the Urban Institute, a Washington nonprofit that studies health issues, estimated this month that 5.4 million U.S. adults gained coverage since September.

Admissions Rise

Today’s report from the Bureau of Economic Analysis included Obamacare enrollments only through Feb. 15. Enrollment closed April 15 in most of the country, and a surge of sign-ups in March and April will show up in the bureau’s report on second-quarter spending, said Ben Mandel, chief of the federal branch of the bureau’s government division.

Hospital operator HCA Holdings Inc. (HCA) said yesterday in states that have expanded Medicaid the company’s admissions under the program rose 22 percent in the first quarter from a year earlier.

Obamacare patients have filled four times as many prescriptions for costly drugs to treat HIV as people in commercial health plans, said Express Scripts Holding Co. (ESRX), the nation’s largest administrator of prescriptions,

Access Improves

“We do believe that’s because you have individuals who were going untreated before or didn’t have access to coverage because of pre-existing conditions,” said Julie Huppert, vice president for health reform at the company, in a phone interview. “There was targeted outreach to that community. We’re not surprised to see them utilize the benefit early.”

People enrolled in exchange plans filled 47 percent more of the most-expensive kinds of prescriptions, for so-called “specialty” drugs that are usually injected and require special handling, than people in employer plans in January and February, according to an April 9 report by Express Scripts.

U.S. spending for medicines began rising last year, increasing 3.2 percent to $329 billion after a 1 percent decline in 2012, the IMS Institute for Healthcare Informatics reported April 15.

In New Mexico, Presbyterian Health Plan, the insurance subsidiary of hospital system Presbyterian Healthcare Services, saw an increase in nonemergency cardiac and orthopedic surgeries after the beginning of the year, said Lisa Lujan, the president of the division.

“Any time there’s been a barrier to an individual having insurance coverage that’s removed” the plan sees pent-up demand for medical care, Lujan said in a phone interview.

Counter-Indications

The Bureau of Economic Analysis’ report is preliminary, deduced largely from hiring and wage trends in the health-care industry, said Paul Hughes-Cromwick, a senior health economist at the Altarum Institute in Ann Arbor, Michigan, which follows health spending. There are counter-indications, he said, such as the insurer WellPoint Inc. (WLP) reporting today that its “medical loss ratio” -- the amount it paid out for medical claims -- was little changed in the first quarter.

“We want to see more information,” he said in a phone interview. “You ought to figure, ‘gee, here’s a gigantic insurer, let’s see more utilization so we can be more comfortable with these numbers,’”

Yet there are only two possible explanations for growth in health spending, said Charles Roehrig, a vice president at the institute: higher prices or higher utilization. Health-care prices increased just 1.1 percent in March from a year earlier, Hughes-Cromwick said.

“It’s got to be utilization,” Roehrig said. “But there are no direct data on utilization that we can go to.”

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Bruce Rule, Andrew Pollack

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