US healthcare expenditures may be heading for a fifth-straight year of low growth

When analysts at CMS published their review of 2012 national healthcare spending at the beginning of January—showing a fourth consecutive year of below-average growth---commentators on both the left and the right pounced; the latter to attribute lower growth to lingering effects of the Great Recession, and the former to assert that it’s finally time to admit that the Affordable Care Act (Obamacare) is indeed “bending the cost curve” of healthcare. CMS itself was cautiously neutral: while noting that some “sub-components of national health expenditures” were being better controlled, overall the law has had “minimal impact on aggregate health spending through 2012.”

Now, a new report from Altarum Institute, an Ann Arbor, MI-based nonprofit, adds another data point for Obamacare’s cost-controlling effect, estimating that national health expenditures grew by only 4.1% in 2013: “While above the 3.7% seen in 2012, this looks to be the fifth consecutive year of spending growth in the 4 percent vicinity, a rate not previously seen in the 50-plus years of national health expenditures accounting until 2009.” Prior to the 2008-9 recession, healthcare costs had been growing at around 7% annually—well above the inflation rate. Adding to all the confusion about the healthcare-expenditures debate, national costs are expected to grow faster in coming years, for the simple fact that more people are being insured under Obamacare. Altarum says that year-over-year costs for December 2013 were up 4.5%, which “could be signaling a long-expected acceleration” as the recession further recedes and more Americans make use of healthcare services.

Altarum’s analysis is not the equivalent of CMS’; one of the factors they look at are healthcare employment trends (which have been also been flattening in the past few years), and it notes that its 2013 estimates are preliminary.

Lower growth in US pharmaceutical expenditures have also been a trend in recent years—IMS Institute for Healthcare Informatics noted that expenditures dropped by 1% in 2012, the first recorded year-over-year decline since the accounting began. They will pick up by 1-4% annually over the next three years, below the 3-6% growth predicted for the global market. It’s worth recalling, in this context, that the pharma industry, as represented by PhRMA, was one of the early proponents of what became the Affordable Care Act, in return for a more-or-less hands-off policy on price negotiations by the feds. The near-term prospects for the industry could have been a lot worse.