Nearly a decade ago (October 1, 2013), the ignominious launch of the Affordable Care Act (ACA) website healthcare.gov marked the end of an era. The years leading up to the passage of the ACA focused on two pressing national health policy issues: health insurance coverage for more (all) Americans and the cost (or value) of health care.
Which should be the top priority? How should the goals be pursued? It’s a lively debate, and every Republican who ran for president in 2008 announced a comprehensive health care reform plan in the primaries. It was the first time that the company was talking about the fact that it had been established. But with the passage of the ACA, its fate was sealed. Despite some messages (“bending the cost curve”), the ACA was a coverage-focused reform that did nothing to change cost increases.
Fast forward the clock to 2024, and the biggest concern is health care costs. The illusions about Medicare for All and other universal health coverage are gone, and data helps us understand why. of national medical expenses (NHE)’s 2023 results are as follows:
U.S. health spending will reach $4.9 trillion, increasing 7.5% in 2023 from 4.6% in 2022.
The health sector’s share of the economy in 2023 was 17.6%, similar to 17.4% in 2022.
Acceleration in health spending growth (from 4.6 percent in 2022 to 7.5 percent in 2023) reflects growth in non-price factors such as service utilization and intensity (after growth slowed significantly in 2022) . Adjusting for health price inflation (measured by the National Health Expenditure (NHE) deflator), real health spending increased by 4.4 percent in 2023. This is higher than the 1.4 percent increase in health spending in 2022 and faster than the growth rate. As a percentage of real GDP, it was 2.9% in 2023.
This last fact is particularly striking. The real growth rate of spending (4.4%) has exceeded the growth rate of the income that finances that spending (2.9%). This is a return to the bad old days, when NHE was able to grow from a small portion of economic activity to nearly 20 percent of gross domestic product (GDP).
One of the fundamental features of America’s pressing fiscal problems is that Medicare’s growth rate, at 7.0%, is much faster than economic growth, which drives revenue growth. Cost trends indicate that health care may be at the intersection of pressures on both federal finances and household budgets in the near future.
