Healthcare spending continues slow-growth trajectory in Q3

A first look at health spending in the third quarter suggests demand for medical care hasn't sharply increased this year despite the greater number of Americans who now have health insurance because of the Patient Protection and Affordable Care Act.

Health spending rose 3.5% during the third quarter compared with the same period last year, according to U.S. Commerce Department estimates. The spending is not adjusted for inflation. The estimate offers a first look at consumer spending on medical services, such as hospital care and clinic visits, in the quarter. It will be revised twice in coming months as more data becomes available.

The modest growth is in line with the historically slow rate of national health spending that has persisted since the recession.

“This is a striking result,” said Paul Hughes-Cromwick, a senior health economist with the Altarum Institute. “We're just not seeing the acceleration that was so widely predicted,” he said.

Economists anticipated an uptick in health spending as the Affordable Care Act expanded insurance coverage this year and the economy gained strength.

When compared with U.S. economic growth, measured by the gross domestic product also unadjusted for inflation, health spending growth lagged the economy by 1 percentage point, Hughes-Cromwick noted. “That's what is going to make or break the country's fiscal future,” he said. “We simply have to keep healthcare spending growth below GDP growth.”

Overall, the GDP growth rate was 3.5%, after adjusting for inflation, or up 4.9% last quarter unadjusted.

During the second quarter, health spending grew 3.8% from the same period the prior year. The second quarter was closely watched for signs of accelerated health spending, as those who waited until March to buy health plans gained benefits. That did not materialize.

The estimate of health spending does not include goods, including pharmaceuticals, which Altarum projects accounted for 13% of U.S. healthcare spending last year.

Hughes-Cromwick said other indicators also point to moderate health spending growth for services. National health insurers report increased profits in the third quarter as the newly insured bring in new revenue, but spending for enrollees' healthcare was moderate, he said.

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