ACA Sparked Spending Burst on Physician Services in 2014

December 03, 2015

The Affordable Care Act (ACA) may give physicians headaches, but it is also giving them more insured patients, which is the main reason why expenditures on physicians services grew at a far faster clip in 2014 than 2013, government actuaries reported yesterday.

Overall public and private spending on healthcare last year rose 5.3% compared with 2.9% in 2013, ending a 5-year run of historically low growth, according to an analysis issued by the Office of the Actuary of the Centers for Medicaid & Medicaid Services (CMS). The study, published in Health Affairs, attributed the surge primarily to the dramatic expansion of Medicaid and private insurance coverage under the healthcare reform law.

At $3 trillion, healthcare spending in 2014 accounted for 17.5% of the gross domestic product, an uptick from 17.3% in 2013.

The amount individuals, private insurers, Medicare and Medicaid, and all other third-party payers spent on physician services grew by 4.6% in 2014. That compares with 1.7% the year before, which was the lowest growth rate since the early 2000s, when annual spending on physician services was climbing by 8% or more. In addition to seeing more insured patients, primary care physicians in particular benefitted last year from higher Medicaid and Medicare fees authorized by the ACA. However, the Medicaid raise expired in 2015, and the extra money from Medicare runs out at the end of December.



Expensive Hepatitis C Drugs Singled Out

In addition to the ACA, the CMS study singled out another significant stimulant to healthcare outlays in 2014: the introduction of four remarkably effective, but remarkably costly, drugs for chronic hepatitis C virus. They were sofosbuvir (Sovaldi, Gilead Sciences), simeprevir (Olysio, Janssen Pharmaceuticals), ledipasvir/sofosbuvir (Harvoni, Gilead Sciences), and ombitasvir, paritaprevir, and ritonavir tablets copackaged with dasabuvir tablets (Viekira Pak, AbbVie). The US Food and Drug Administration approved the first two medications in late 2013 and the last two in 2014. Sofosbuvir and ledipasvir/sofosbuvir, initially priced at $84,000 and $95,000, respectively, for a course of treatment, have become poster children for runaway drug costs.

The CMS actuaries cited a report by IMS Institute for Healthcare Informatics that put US spending on these four new hepatitis C virus drugs in 2014 at $11.3 billion.

Expenditures on all prescription drugs that year grew by $32.4 billion to $297.7 billion, for a 12.2% increase, with the four hepatitis C virus drugs accounting for about one third of that. The year before, drug spending rose by only 2.4%.

The spike in prescription drug spending last year also reflects a 1.8% increase in the number of retail prescriptions, brought about mostly by Medicaid expansion, according to CMS.

A copy of the CMS report is available on the Health Affairs website.


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