Even after the passage of the Affordable Care Act has brought nearly 10 million people into the United States' healthcare system, healthcare spending across the country has remained low. The one exception is prescription drugs, where spending has increased dramatically.
An August 7 report by the Altarum Institute found that spending grew 4.8% from June 2013 to June 2014, accounting for 17.5% of the nation's gross domestic product. Historically speaking, that is a steady number—growth has hovered just below 4% since 2009.
The sector appears to be reacting to these numbers in its hiring decisions. Job growth slowed this summer to the lowest it has been since 2010 and the Bureau of Labor Statistics reported an average job loss in hospitals in June. But numbers can be somewhat deceptive and experts are predicting the ACA's influx of patients will prompt greater volumes in late 2014 and early 2015.
Cold winter and last-minute enrollments slow spending
Analysts had expected extensive growth during the first three months of 2014 because of the influx of new patients into the system, but growth was moderate, at 4.6% according to the Altarum report.
"The rule of thumb is that people without health insurance spend about half as much on healthcare as someone similar with insurance," said Charles Roehrig, director of the Altarum Center for Sustainable Health Spending. "When 10 million people get insurance, it should cause spending to increase."
Roehrig said experts are attributing the sluggish spending to factors like the brutal winter (which slowed all economic growth), people waiting until March to enroll, and the time it takes to get integrated in the system.
The 4.8% data from the Altarum report is from the Bureau of Economic Analysis of the U.S. Department of Commerce. These numbers, said Roehrig, are more estimates than true spending data. Growth should be more noticeable in the second quarter, but CMS won't have hard numbers on that until September.
Roehrig has seen signs of growth with publicly traded hospitals, which have to report numbers each quarter. These providers have begun to show an uptick in volume and revenue.
Is Sovaldi to blame?
One number to take note of in the report is the growth in prescription drug spending. In the early 2000s, spending was in the double digits. Medication spending slowed after that and was only at 0.4% in 2010, 2.5% in 2011 and 0.4% in 2012.
The cyclical nature of prescription drug spending is not associated with an increase in prescriptions being written or increase in drug usage, but is more a sign of what is going on in the industry, Roehrig said.
When spending is high, it is associated with blockbuster brand-name drugs like Lipitor and Plavix entering the market. Right around 2012, both of those medications' patents ran out and spending reduced as they were replaced by lower-cost generic drugs.
As spending on these traditional medications slows, a new surge in high-cost specialty drugs (like Sovaldi) seems to be increasing. That is fueling the current growth.
Looking ahead, overall healthcare spending is anticipated to increase above the 4% mark, Roehrig said. This will likely be due to the continued spending on costly specialty drugs; the funneling of another 10 million people into the health system as more states expand Medicaid coverage and others join state exchanges; and hospitals hiring more staff to account for the greater patient volumes.
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