America’s health cost crisis is no longer in remission.
Last week, the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) announced that healthcare spending had risen 9.9 percent in the first quarter of 2014 — the largest quarterly increase in more than 30 years.
The BEA’s estimate comes on the heels of a report from the IMS Institute for Healthcare Informatics that attributed the jump in spending to increases in physician office visits, hospitalizations, and prescription-drug usage.
Worse, Obamacare will only exacerbate America’s health cost crisis as it takes full effect this year.
Believe it or not, Americans have had some relief from high healthcare spending over the past few years. From 2009 to 2012, spending grew less than 4 percent a year, the lowest growth rate in 50 years.
The slowdown was largely due to the recession. Americans responded to stagnant wages and an uncertain economy by cutting back on medical expenses.
But with the economy picking up once again, health spending has returned to pre-recession levels. In January, it reached historically high levels as a share of GDP. And in February, health spending growth reached a seven-year high, according to the Altarum Institute.
Spending is going up because people are consuming more care. Doctor’s office visits increased by 2.7 percent in 2013. Specialist visits rose 4.9 percent the same year.
Hospitals tallied 13 million more outpatient visits in 2013 — a 3.2 percent increase over 2012. Inpatient visits rose 10.5 percent. Overall, hospital admissions increased 2.6 percent last year.
Pharmacies have also observed an influx of customers. Patients filled an average of 12 prescriptions in 2013 — 2 percent more than in 2012. Spending on medications grew 3.2 percent in 2013. The increase came after a 1 percent spending decline in 2012 — the first drop since Medicare started measuring in 1957.
Spending will climb even higher over the next few years as more Americans gain insurance through Obamacare, The Centers for Medicare and Medicaid Services (CMS) estimates that 11 million Americans will get coverage this year — driving health spending up 6.1 percent. That’s two percentage points higher than last year’s growth rate.
Over the next decade, CMS projects that annual national health spending will grow 5.8 percent annually — 1 percent faster than the expected growth rate of the economy.
Higher health costs spell higher insurance premiums. Aon Hewitt, a consultancy, estimates that premiums could rise 6 to 7 percent this year. David Arxene, a fellow with the Society of Actuaries, thinks they could jump 8.5 percent next year.
Those premium hikes could take a serious toll on businesses and individuals. The average per-employee health cost rose to $10,471 in 2013. Aon Hewitt posits that costs could exceed $11,000 in 2014.
That sum doesn’t include copays, co-insurance, and deductibles. Average employee out-of-pocket costs are expected to surge more than 10 percent this year, to $2,470.
Then there’s the impact of rising health costs on the government’s bottom line. This year, Obamacare will dole out $17 billion in subsidies to people shopping for coverage in the exchanges. Through 2024, the total subsidy tab is projected to exceed $1 trillion, according to the Congressional Budget Office.