May 9—The federal government’s recent report that healthcare grew a recent record rate of 9.9 percent in the first quarter of the year was disputed in a new report.

The Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce recently estimated that healthcare services spending increased by about $50 billion in the first quarter of 2014, which would translate into an annual increase of more than 10 percent.

But a new report from Altarum Institute casts doubt on the 10 percent annual healthcare growth figure and concluded that 7 percent or lower annual growth is more likely.

Charles Roehrig, vice president and director of Altarum's Center for Sustainable Health Spending, wrote in a related blog post that several factors accounted for the lower annualized increase, which was based on comparing spending in the current month to spending in that same month from the prior year—instead of BEA’s comparison with the preceding quarter.

“This seems to be a more reasonable indicator of our current growth path than the 10 percent annualized rate discussed above and may even be a bit high,” Roehrig wrote.

The extent of healthcare’s spending growth this year as the Affordable Care Act’s (ACA’s) major coverage expansions begin is being closely watched for its political and economic repercussions.

The Obama administration downplayed the significance of the first quarter’s spending growth and concluded that the increase—as driven by increased ACA-related utilization—was “neither a surprise, nor a cause for concern.”

“Furthermore, any upward pressure on health care 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,” stated the White House blog post.

Utilization Increasing?

Even the lower 7 percent growth found by Altarum is an acceleration from previous quarter, which Roehrig credited to increased utilization—since healthcare inflation remains low. Specifically, “ACA-expanded coverage could drive spending up without any change in prices or utilization via shift from uncompensated to compensated care. Also, there is some evidence of utilization growth in states expanding Medicaid coverage.”

Such increased utilization by those newly insured through the ACA was recently reported by several of the largest for-profit health systems.

The Altarum report followed a recent PwC’s projection that medical cost inflation in 2014 will defy historical patterns and amount to 6.5 percent.

That report credited the expected low medical inflation rate to “aggressive and creative steps by employers, new venues and models for delivering care, and elements of the Affordable Care Act.”

Meanwhile, healthcare spending trend watchers are waiting to see whether BEA updates its healthcare growth figures for the first quarter during their scheduled mid-June revisions.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter @rdalyhealthcare.

Publication Date: Monday, May 12, 2014