JANUARY

Slow health spending growth and high quality of care
Because most premium dollars go toward paying medical claims, keeping premiums (and
taxpayer-funded premium and cost-sharing subsidies) affordable requires controlling
health care costs. Medical spending trends for the individual market reflect those for the
health system as a whole. In recent years, health spending has been growing relatively slowly
compared with historical averages. Nevertheless, national health spending made up 17.8
percent of the economy in 2015. 48 Because health spending has been growing faster than the
gross domestic product (GDP), this share is increasing.
There are signs that health spending growth rates are beginning to increase. Prescription
drug spending growth has been particularly high recently, due to price increases and the
introduction of high-cost specialty drugs. According to national health spending projections
from the CMS Office of the Actuary, annual per capita spending growth for those with
private health insurance will increase from 3.2 percent in 2014 to 4.9 percent from 2016 to
2019. 49 This higher growth rate remains lower than the 7.1 percent annual growth rate from
2007 to 2013, but exceeds projected annual per capita GDP growth by 1.0 percentage point.
Growth in per capita health spending will directly result in premium increases.
Not only is national health spending high and growing, there is evidence that we are not
spending our health care dollars wisely. For instance, the Institute of Medicine estimated
that 10-30 percent of health spending is for unnecessary care or other system inefficiencies
and that missed prevention opportunities also add to excess spending. 50 Although the
medical care that people receive can vary dramatically across and within geographic regions,
those variations are unrelated to health outcomes, 51 also indicating inefficient spending. In
addition, medical errors are now the third leading cause of death, 52 raising quality concerns.
AMERICAN ACADEMY OF ACTUARIES 19