Growth in Healthcare Spending Increased Moderately as Newly Insured Obtained Care, Report Finds

Growth in healthcare spending per capita increased 4.3% in 2014, the year ACA coverage provisions took effect, which was a "moderate" pace compared to the historically low growth rate between 2000 and 2013, according to a new report from HHS's Office of the Assistant Secretary for Planning and Evaluation. Despite the national increase in the cost growth rate, payer-specific cost growth remained low in 2014: 2.4% for Medicare, 2.9% for private insurance, and a 3.6% decline for Medicaid. The report's authors explain that the difference between the growth in national versus payer-specific spending indicates that previously uninsured and underinsured individuals gained coverage and access to care, leading to an increase in expenditures. The authors also allocate much of the growth in per person spending to the growth of high-cost specialty prescription drugs, which accounted for 56% of per enrollee spending growth in Medicare and 47% of per enrollee spending growth in private insurance. The report's authors note that without the ACA's coverage provisions and the introduction of high-cost specialty drugs, the growth in healthcare spending would have likely remained at 2000-2013 levels.

CMS Considers Significant Changes to Improve Risk Adjustment Program

CMS released a white paper outlining several potentially significant changes to the methodology used to determine payment amounts under the ACA's risk adjustment program beginning in 2018. Proposed changes include: incorporating prescription drug data into the model; accounting for partial year enrollees by creating separate models; and using the individual and small group market claims data already collected for model calibration instead of the commercial data set of principally employer-sponsored coverage. Recognizing the possibility of cost outliers, even within a diagnosis, CMS is also considering building into the program a type of reinsurance arrangement called "high risk enrollee pooling," where costs above a certain threshold would not be used to calibrate risk adjustment transfers.

CBO Projects Increased Federal Health Spending Driven by Higher-than-Expected Medicaid Enrollment

New projections from the Congressional Budget Office (CBO) estimate that federal health insurance subsidies for people under age 65—provided through a variety of federal programs and tax preferences—will cost the federal government $660 billion in 2016, and is expected to reach $1.1 trillion in 2026. Just over 40% of the cost in 2016 will be for Medicaid and CHIP. Approximately 17% of the federal subsidies (or $110 billion) are attributed to changes under the ACA. These costs are expected to increase to $1.4 trillion over the next ten years, a $136 billion increase from March 2015 estimates driven by significantly higher-than-anticipated Medicaid enrollment. However, CBO's most recent estimate of the cost of changes under the ACA between 2016 and 2019 (the final years of the original 10-year projection) is 25% lower than was estimated when the law was signed in 2010. This is due to lower-than-expected Marketplace enrollment and slower healthcare cost growth. The CBO's most recent estimates of costs due to changes under the ACA will be the last the agency intends to provide, saying that isolating coverage costs specific to the ACA is becoming "more difficult and less meaningful." CBO will continue to estimate the cost of legislative changes to the ACA as requested and will provide projections of coverage levels and related subsidies, penalties, and taxes under current law.