U.S. Health Spending Up Most Since '07, Fueled by Obamacare

  • Drug spending climbs 12.2%, driven by hepatitis C pills
  • Millions of new insured contribute to $3 trillion in costs

U.S. health-care spending jumped 5.3 percent last year, the biggest increase since President Barack Obama took office, as millions of people gained insurance coverage under Obamacare.

Spending on hospitals, doctors, drugs and other health-care expenses hit $3 trillion in 2014, or 17.5 percent of the economy, according to a study released Wednesday by government actuaries. Enrollment in private health plans increased by 2.2 million people to 189.9 million, while 7.7 million more people were covered by Medicaid, the U.S.-funded, state run program for the poor, bringing the total to 65.9 million.

The U.S. had seen years of slow health-care cost growth after the economic downturn that ended in 2009. The 2.9 percent rise in 2013 was the slowest in the 55 years that the U.S. has studied the figure. Actuaries at the Centers for Medicare and Medicaid Services, or CMS, estimated in July that spending will rise an average of 5.8 percent a year over the decade through 2024.

“Today’s report reminds us that we must remain vigilant in focusing on delivering better health care outcomes, which leads to smarter spending, particularly as costs increase in key care areas, like prescription drugs,” CMS Acting Administrator Andy Slavitt said in a statement.

Spending on retail prescription drugs was among the fastest-growing categories, rising 12.2 percent, as new treatments for hepatitis C and some cancers were introduced, according to the report. Drug spending accounted for $297.7 billion, just under 10 percent of the total.

At $971.8 billion, hospital care was the largest spending category, and increased 4.1 percent from 2013. Spending on doctors and other clinical services rose 4.6 percent to $603.7 billion, while nursing home care expenditures climbed 3.6 percent to $155.6 billion. Administrative costs for private health insurance, which includes items such as taxes and profits, rose 12.4 percent to $194.6 billion, while administrative costs of government insurance rose 10.7 percent to $40.2 billion.

Richard Frank, the assistant secretary for planning and evaluation at the Department of Health and Human Services, said in a statement that the cost growth will probably slow after this year’s Obamacare-fueled gains. He pointed out that per-person spending increased 3.2 percent for individuals with private coverage and 2.4 percent for those in Medicare, while falling 2 percent in the Medicaid program. Average per-person spending totaled $9,523, up 4.5 percent.

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