Health Care Now Gets Biggest Slice of Income From Federal Government

In 2015, health care’s share of the U.S. economy grew by 0.4 percent and continued to increase. This uncommonly high growth rate compared to the previous year can be traced to last year’s higher spend on prescription drugs and expenditure related to President Barack Obama’s health-care law. A Centers for Medicare and Medicaid Services report has revealed that of its share of gross domestic product, health care has achieved a significant rate of 17.8 percent. From 2009 to 2013 figures showed that the portion spent on health care either increased or dropped no more than 0.1 percentage points year on year. However, growth was recorded at 0.6 percentage points from 2013 to 2015.

When making reference to how the health law, the Affordable Care Act, extended coverage for Americans, Anne Martin, an economist in the CMS Office of the Actuary, said that although the increases of 2014 and 2015 materialized more than five years after the end of the country’s last recession, they occurred simultaneously   as 9.7 million individuals gained coverage in private health insurance and 10.3 million more registering with Medicaid. Also, the swift rise in amounts being spent on retail prescription drugs is an additional factor that has contributed to the situation. Another significant feature of 2015 revealed by the report, was the fact that the largest share of health care is now paid for by the federal government. The authors indicated that the tendency for health care to capture a bigger slice of the economy is expected to be ongoing into the next decade, propelled by an aging population, economic changes and rapidly increasing medical costs.   

It was also shown in the report that in 2015, growth in health-care spending was 5.8 percent, topping out at $3.2 trillion. However, while the price of health care went up, economic growth of 4.2 percent in 2014 slowed down to 3.7 percent in 2015. Also, the increase in the use of services and resources was affected by a greater number of people using health care more frequently under Obamacare, because more generous benefits are included in their coverage, ranging from maternity care to mental health. Additionally, the rate of growth in spending has been boosted by expensive drugs hitting the market. These have included those that cure hepatitis C, which in 2014 alone was responsible for $11.3 billion in health-care expenditure. Despite this growth in prescription drugs slowing in 2015 compared to a record high in 2014, it still rose much quicker than the outlay on doctors and hospitals, which was 9 percent. In the same year, 45 new drugs were approved, exceeding any other year during the last decade and more than the 41 in 2014, a period when treatment drugs for rare diseases and cancer were launched. When it comes to comparisons, 10 percent of health-care spending goes on drugs, a third on hospitals and a fifth on doctors.

The growth rate of Medicaid spending was also faster than other sources, measuring 9.7 percent, but slower than in 2014. Depending on the state, 17 percent of health-care spending went to this scheme, which offers health cover to people of low income, those who are disabled and includes maternity care and nursing home costs. Under the health-care law, rises in Medicaid payment contributions were partly responsible for the federal government paying the most for health care than other sources in 2015, accounting for 29 percent of total medical bills. Private health insurance and Medicare, the government’s scheme for seniors and the disabled, also continued to be propped up by federal dollars. Under the Obamacare umbrella, Medicaid programs can be extended by states to low-income individuals, but partly for political reasons, many choose not to. In 2014, although full financial backing was provided by the federal government for state expansion, 2015 saw state remuneration gradually start to diminish. This will be an ongoing occurrence until five years after states have expanded.

By 2014, Medicaid had been extended across twenty-six states, with three joining them in 2015. Also, both local and state expenditure on Medicaid rose, escalating by 1.7 percent in 2014 and 4.9 percent in 2015, reaching a figure of $201.1 billion. This could be due to states experiencing unexpectedly higher enrollment numbers in Medicaid programs, as the number of people who would have qualified for the plan without Obamacare, started to join. Kaiser Family Foundation data have revealed that in the 2015 financial year, rates were increased in 47 states, due partly to a better economy. It was also pointed out in the report that out-of-pocket expenditure on health increased by 2.6 percent in 2015, whereas in 2014 it was 1.4 % and 2.4 % in 2013, lower than figures recorded in 2011 and 2012. Health-care costs per individual reached $9,990, an increase of 5 percent. 

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