A sharp rise in prescription drug spending, driven largely by a new generation of expensive hepatitis C drugs, helped push the nation's health-care expenditures to $3.1 trillion in 2014 -- the biggest increase since the recession.
According to a new projection published on Tuesday in Health Affairs, the U.S. is at the beginning of a period in which health-care spending will creep up after years of a slowdown in spending growth. Health spending could even modestly outpace the growth in the economy. By 2024, health care is projected to account for nearly a fifth of the gross domestic product and federal, state and local governments are expected to foot nearly half the bill.
The economists from the Centers for Medicare and Medicaid Services who crunched the numbers said health care spending increased 5.5 percent in 2014 and projected an average 5.8 percent annual growth in health spending between 2014 and 2024.
There are several major factors behind the accelerated growth over the next decade, economist Sean P. Keehan said at a press briefing Tuesday morning. More people have gained health insurance coverage under the Affordable Care Act, the aging of the Baby Boomer generation and stronger economic growth will all contribute to the long-term trend, he said.
Prescription drug spending has also increased markedly, largely due to the debut of expensive hepatitis C drugs over the last two years, Keehan said. In 2013, prescription drug spending grew just 2.5 percent compared with the previous year, whereas in 2014, drugs spending shot up 12.6 percent. The effects of those drugs on 2015 spending are expected to be tempered by rebates offered by the pharmaceutical companies. Prescription drug spending growth is projected to increase 7.6 percent in 2015.
"The report is very clear that last year was unique and it was driven in part by expansion of health care coverage and new cures that are available to patients," said Robert Zirkelbach, senior vice president for communications at PhRMA, an industry group. "And even with new treatments for Hepatitis C, high cholesterol, and cancer, the federal government is projecting that the spending going to medicine will continue to be approximately 10 percent through 2024, which is the same share it was in 1960."
The uptick in health spending was largely predicted the last time the forecast was done. Although spending growth rates are picking up, they are still below pre-recession levels. Health care costs increased 9 percent annually in the 30 years preceding the recession.
Keehan and colleagues acknowledged there are areas of uncertainty in making the future projections. For example, new, expensive drugs could be approved for conditions without effective treatments today and a wave of consolidation among hospitals and big insurers could affect spending.
Much of the rest of the picture will remain unchanged, including the rough breakdown of how the dollars are spent between 2013 and 2024. Nearly a third of the money will go to hospital care, nearly a fifth to physician services, and a tenth to prescription drugs in 2024 -- small changes from 2013 when slightly more was spent on physicians and slightly less on prescription drugs.
How those costs are paid, however, will shift. The proportion of health-care costs paid by out-of-pocket spending by consumers and private insurers will slightly decrease, while Medicare and Medicaid will both increase.