fah hospital policy blog

Perspectives on health policy affecting America’s hospitals and the patients we serve.

New CMS Projections on Health Care Spending: What the Numbers Really Mean for Consumers

July 29, 2015 | FAH Hospital Policy Blog Team

Category: Spending Slowdown

Yesterday the Centers for Medicare and Medicaid Services (CMS) released their annual health care spending projections, covering the time period 2014-2024. The data shows health care spending growth has increased to 5.5% for 2014, which is a modest increase from the national spending slowdown trend that has yielded historically low health care spending growth for several consecutive years. And while many are quick to declare the end of the spending slowdown or ratchet up concerns, it is imperative that we take this latest data into perspective.

Growth to remain well below average in the near-term. Historically, health care spending has grown 9% annually. The 2014 data is still well below the average, and is projected to remain in that 5% range through 2024.

Hospital price growth maintains record-lows. One of the most critical takeaways from the report is that of enduring trends from the national spending slowdown. Hospital price growth remains at a record-low 1.4% for 2014. CMS notes that slow growth in private payments is the primary driver – further weakening the urban myth that hospital consolidation leads to higher prices.

Among the main drivers of this growth in health care spending that CMS outlines:

More people are accessing health care. Greater numbers of Americans are becoming eligible for Medicare as the Baby Boomer generation ages. In addition, millions of uninsured or underinsured Americans are gaining access to affordable health care coverage. Increased utilization of health care as a result of these coverage expansions is impacting the overall spending growth CMS is projecting.

Drug costs and drug price inflation are on the rise. CMS also points to increased drug prices for specialty medicines, and overall drug price inflation as a contributor to the latest data for 2014-2024.

It is a natural cause and effect that as more consumers utilize health care and as drug prices increase, we would see a slight impact on health care spending as a whole. A 2014 growth rate of 5.5%, and a projected rate of 5.8% over ten years is still substantially below average for national health care spending. And as other key price indicators remain at historic lows, consumers should see this latest report as the natural response of our health care system as it evolves.

The national spending slowdown trend has endured as a result of key investments in our health care system that are driving structural change. Hospitals are working diligently in this vein to continue key investments, while preserving access to health care for all consumers.