Spending on prescription drugs and health insurance overhead rose by double digits last year, making them the main drivers of higher estimated health spending, according to a new economic analysis.
The Altarum Institute's Center for Sustainable Health Spending's latest economic indicator report gives credence to data released this week from the U.S. Census Bureau showing that health spending is on the rise again. That would contrast with the past several years of historically low growth.
Altarum economists said national health expenditures were almost $3.16 trillion in the 12 months that ended January 2015, or about 5.7% higher than they were in January 2014. Total health spending for 2014 is projected to be up 5%, compared with a 3.6% growth rate in 2013.
“It's a substantial increase for the year as a whole,” said Charles Roehrig, director of the Center for Sustainable Health Spending.
Earlier this week, the Census Bureau released its quarterly services survey, which includes the amount of money spent on hospitals, doctors, nursing homes and other healthcare services. It does not factor in prescription drugs and other non-service areas, which account for about 30% of the healthcare economy. Even so, the agency said healthcare spending climbed at a 5.4% annual rate in the fourth quarter.
The Altarum center report, which did not incorporate Census Bureau data, found that pharmaceutical spending increased 11.6% between January 2014 and January 2015. Health insurance administrative costs rose 10.1% as more people gained coverage under the Affordable Care Act. However, Roehrig said the health insurance figures might be overestimated because the data were incomplete.
Spending on drugs increased heavily in 2014, thanks to pricey specialty treatments. Roughly $10 billion of hepatitis C drugs were sold in the U.S. last year. Sovaldi, which costs $84,000 for a normal course of treatment, represented a majority of those sales.
“That's enough to push health spending all by itself almost three-tenths of a percentage point,” Roehrig said of the hepatitis C drugs. However, he expects prescription-drug spending will be lower in 2015 as the hepatitis C drug market continues to level out.
Hospital expenditures increased 6.1% year over year, while physician spending inched ahead 2.6%, the Altarum center found. The think tank will release an updated analysis March 25 that incorporates the Census Bureau's latest data.
Follow Bob Herman on Twitter: @MHbherman