US healthcare spending to rise despite law

Posted on June 13, 2012

The Obama administration’s healthcare reform law, which is currently sitting in limbo before the Supreme Court, will not reduce spending on health services over the next decade, according to new government data.

From 2010 to 2021, the law is projected to add $478bn to total spending on healthcare. During that span, health spending will increase from 17.9 per cent of US gross domestic product to 19.6 per cent, and annual rates of increase will be in line with what they have been during the last 30 years.

    Health spending in the US is expected to soften during the next two years due to the stubbornly sluggish economy, before rising as more components of the Obama administration’s healthcare law take affect.

    The rates of increase are below historical norms, as high levels of unemployment have deterred people from spending on medical procedures that they can put off. Meanwhile, prescription drug costs are declining due to patent expirations on top-selling drugs.

    The report by the Centers for Medicare and Medicaid Services found that spending on healthcare is expected to grow by 3.9 per cent in 2011 and by 4.2 per cent in 2012 before growth slows to 3.8 per cent in 2013.

    The projections come at a time of unprecedented uncertainty about healthcare in the US, as the Supreme Court will determine the fate of the Obama administration’s Affordable Care Act sometime this month. The law, which mandates most citizens to purchase health insurance, could be overturned or dismantled by the court.

    Tuesday’s report showed that the reforms have only reduced health spending by about 0.1 per cent this year to $2.7tn, and that if the law is rolled out as planned, it will actually cause a jump in spending as more people become insured.

    National health spending is expected to grow by 7.4 per cent in 2014, when the mandate is set to be implemented, and then grow at an average rate of 6.2 per cent during the following seven years.

    “These new enrollees are expected to contribute to faster spending growth in 2014 for both Medicaid and private insurance, largely because of higher enrolment leading to increased use of services,” the report said.

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