Health Care Spending Won’t Grow as Fast as Projected

Charles Roehrig of the Altarum Institute disputes the Bureau of Economic Analysis projections of a 10% increase in health spending for 2014.

“This is NOT a correct interpretation, and it is important to explain why. Moreover, this 10% figure conflicts with the 7% growth that we are reporting in our latest Health Sector Economic Indicators.”

“In short, because the surge in numbers of insured individuals will not be repeated in subsequent quarters, the 10% annualized rate of growth in spending is NOT a good indicator of how the full year is likely to play out.”

” … our annualized increase is based on comparing spending in the current month to spending in that same month from the prior year. Thus, the 7% increase shown for March 2014 indicates that spending is 7% higher than March 2013.”

Spending Chart

Will health care costs rise? The Wall Street Journal reports that “recent studies show that health spending is rising more rapidly after five years of record low increases … The main factor was lingering effects of the slow economy; people put off visits to doctors and hospitals and bought fewer drugs.”

“Now utilization is picking back up as the economy improves.”

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