Healthcare Spending Spikes Under ACA

Although healthcare prices only increased 0.5%, real healthcare spending soared 9.9% in the last 3 months, according to the latest data from the Bureau of Economic Analysis (BEA). Spending in the first quarter of 2014 reached $43.3 billion.

The increase in healthcare spending represents the largest spike since 1980, according to Bloomberg, which also reported the spending is mostly a result of increased prescriptions for costly medications and more elective surgeries.

According to a post on the White House blog by Jason Furman, the chairman of the Council of Economic Advisers, the steep increase in healthcare spending is, in fact, attributable to the Affordable Care Act. The rise in utilization is being drive by newly insured Americans who are using healthcare services more.

Bloomberg reported that “Health plans, pharmacies and hospitals say they are seeing the first signs of newly insured patients seeking medical care, including high-cost drugs and surgeries.”

Healthcare spending is measured based on estimates of enrollment trends in the ACA’s insurance exchanges, Medicaid benefits, and consumer spending on hospitals, nursing homes, doctor visits, and additional healthcare services, according to CaliforniaHealthline.

“Ensuring access to care is a key goal of the Affordable Care Act’s coverage expansion, so this increase in utilization is neither a surprise, nor a cause for concern,” Furman wrote to a post on the White House blog.

Since the report from the BEA only includes enrollments through mid-February, the actual increase in healthcare spending as a result of all the new enrollees is still unknown. Furman addressed concerns about the surge in enrollment that took place in March, and, therefore, is not represented here.

“Any upward pressure on healthcare spending growth from expanding insurance coverage will cease once coverage stabilizes at its new, higher level, so it does not affect the longer-term outlook for spending growth,” he wrote.