By Chad Terhune, Los Angeles Times
A historic slowdown in U.S. health care spending in recent years may be drawing to a close.
An industry report published this week and health care experts point to a steady rise in medical care being sought by consumers seeing specialists, getting more prescriptions filled and visiting the hospital. Other factors such as millions of newly insured Americans seeking treatment for the first time and higher prices from health care consolidation could also help drive up costs.
Experts aren’t predicting an immediate return to double-digit increases in medical spending. But the emerging trend underscores how difficult it will be for policymakers, employers and health plans to control health care costs going forward.
“2013 was a rebound year for health care,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, an industry research firm that released Tuesday’s report. “We saw health care usage overall up for the first time in three years. We think that is reflective of a strong economy, more patients with insurance and also some pent-up demand for services that may have been delayed or deferred since the economic downturn.”
David Gruber, director of health care research at Alvarez & Marsal, said he’s expecting a similar trend of higher demand coupled with consolidation among hospitals and large physician groups pushing up prices. He said the demand for services is being driven by an influx of Obamacare enrollees, aging baby boomers and people with chronic conditions who can no longer delay care.
“At some point you can’t defer anymore,” Gruber said. Health spending “isn’t going up by double digits, but it could spike to 6 percent or 7 percent.”
There are other forces at play that could serve as an effective counterweight and bear watching. The growing use of narrow provider networks by employers and health insurance companies and a shift away from conventional fee-for-service reimbursement for medical providers can be potent cost-containment tools, Gruber said.
On Monday, the Congressional Budget Office cited the prevalence of narrow networks as one reason premiums for Obamacare coverage in government-run exchanges will be lower in the next few years than previously expected.
David Axene, a fellow at the Society of Actuaries, estimates that rates for individual consumers under the health law may rise, on average, 6 percent to 8.5 percent next year. He cautions that rates will vary across the country, and some health insurers such as industry giant WellPoint Inc. have already warned about double-digit rate hikes in some markets.
“Many exchange health plans got better discounts than anticipated from providers, but there is really a strong pushback now from hospitals and physicians who are concerned about having enough money to cover their costs,” said Axene, an actuary in Murrieta, Calif. “I hope we can stay south of double digits, but there’s no guarantee we will.”
From 2009 to 2012, U.S. health care spending grew annually at less than 4 percent, according to federal data. That’s been the lowest rate of growth in half a century, and has sparked considerable debate about the underlying reasons.
Many health economists and industry officials have attributed the slowdown primarily to lingering effects of the Great Recession, when millions of Americans cut back on medical care. But the Obama administration and other experts have pointed to fundamental changes in health care reimbursement and the delivery of care spurred by the Affordable Care Act.
The IMS Health report found that total U.S. spending on pharmaceutical drugs grew 3.2 percent last year to $329.2 billion. That came after a 1 percent drop in 2012 — the first decline since IMS began tracking the data in 1957.
Patent protections expiring on major drugs and cheaper generic substitutes flooding the market helped drive that previous decrease. Aitken said patent expirations had less impact last year and there was greater use of health care in general.
IMS Health also found that the number of physician office visits, hospitalizations and prescriptions filled all rose last year.
At the doctor’s office, visits to primary care physicians fell less than 1 percent, but trips to specialists jumped 5 percent. The number of hospital visits also grew last year, primarily among commercially insured patients who received outpatient treatment.
Any upswing in medical costs could further squeeze workers. Their health insurance premiums keep taking a bigger bite of their paychecks, as employers shift more health care costs to employees.
There was some good news for consumers. The IMS report found that 57 percent of all retail prescriptions filled last year cost consumers $5 or less. But patients often bear a growing share of the cost for high-priced specialty medications for cancer, rheumatoid arthritis and other chronic conditions.
Will O’Neill via Flickr