Medicare Spent $473 Billion Less from 2009 through 2014 Compared to Previous Spending Trends

Affordable Care Act continues to deliver better care, smarter spending and healthier people

Washington, DC–(ENEWSPF)–March 22, 2016.  The Department of Health and Human Services (HHS) announced today that Medicare spent $473.1 billion less on personal health care expenditures between 2009 and 2014 than would have been spent if the 2000-2008 average growth rate had continued through 2014.  In addition, if trends continue through 2015, that amount could grow to a projected $648.6 billion.  To put this in perspective, those savings are greater than all of Medicare’s spending for personal health care expenditures in 2015.

As the Affordable Care Act approaches its sixth anniversary, it has already brought the share of Americans without insurance to below ten percent for the first time ever, while also constraining spending growth and supporting quality of care. The health care law gives HHS new tools to pay providers for what works, better coordinate and integrate care, and make information more readily available to those who can use it to improve health. Initiatives to limit avoidable hospital readmissions and to promote new payment models that focus on value are contributing to the moderation in overall health spending, and particularly for Medicare.

“Thanks to the Affordable Care Act, we are putting the patient at the center of care and spending our dollars more wisely by paying for what works,” said HHS Secretary Sylvia M. Burwell. “This kind of progress is not easy, but what we have accomplished in six short years is undeniable: from 20 million uninsured, to billions of dollars saved, to changes that are making our health care system work better for everyone.”

Today’s report updates a previously released analysis that also examined Medicare spending growth relative to national health care expenditures. According to today’s report, national personal health care spending increased moderately in 2014, by 4.3 percent per person. The modest increase in growth relative to prior years is primarily the result of the Affordable Care Act’s success in expanding quality coverage to millions of previously uninsured Americans. Many patients with preexisting and chronic conditions can no longer be excluded from insurance plans and they are getting access to affordable health care due to the Affordable Care Act. The report explains that upward pressure on spending growth in 2014 due to expanded coverage will be transitory, and that the underlying cost growth trends experienced by payers have remained low.

Prescription drug spending, in particular new specialty drugs, were an important secondary contributor to the uptick in spending growth in 2014.  The report finds that setting aside these factors, the underlying growth in national health care would have likely remained close to the historical lows seen in prior years.  For example, the prescription drug spending growth rate for traditional Medicare would have remained the same in 2014 as in 2013 in the absence of new Hepatitis C drugs, but instead increased by 4.5 percentage points.

HHS has undertaken a number of initiatives to increase access to quality prescription drugs while moderating cost growth. The Affordable Care Act is closing the Medicare Part D Donut Hole to help seniors and individuals with disabilities afford their prescription drugs and HHS has increased access to information on drug spending by posting the Medicare Drug Spending Dashboard. HHS is also finalizing requirements in Medicaid to reduce costs to states and the federal government, and recently issued a proposed rule to test new models to improve how Medicare Part B pays for prescription drugs and to support physicians and other clinicians delivering higher quality care.

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