Slower growth from in­sur­ance ex­pan­sion … in­creased wages … ex­pen­sive spe­cialty drugs

Modern Healthcare - - NEWS - By Me­lanie Evans

Health­care en­ters the new year fresh off a year­long hir­ing re­bound and signs of the most ro­bust spend­ing growth since the Great Re­ces­sion.

Health sys­tems an­tic­i­pated that the de­mand surge from Amer­i­cans newly in­sured un­der the Af­ford­able Care Act would fade in 2016, and late 2015 data sup­port that. HCA cau­tioned that the big­gest gains from the ACA may have al­ready occurred by April. Econ­o­mists with the Al­tarum In­sti­tute say spend­ing ac­cel­er­a­tion from the cov­er­age ex­pan­sion may have peaked last Fe­bru­ary.

“Cov­er­age is start­ing to level off,” said Charles Roehrig, head of Al­tarum’s Cen­ter for Sus­tain­able Health Spend­ing. “That’s telling us that the im­pact on health­care spend­ing growth should be smaller as we get into 2016.”

The CMS Of­fice of the Ac­tu­ary projects that 2016 spend­ing will in­crease 4.9% to $3.4 tril­lion. Medi­care spend­ing will ac­cel­er­ate next year through 2018. Older baby boomers will cre­ate more de­mand and higher spend­ing.

Con­tin­ued eco­nomic re­cov­ery and low un­em­ploy­ment could be­gin to force em­ploy­ers to in­crease wages. The Fed­eral Re­serve raised in­ter­est rates in mid-De­cem­ber, which could boost health­care prices, too.

Moody’s In­vestors Ser­vice agrees pa­tient vol­ume will mod­er­ate. “We ex­pect the cur­rent strong growth in pa­tient vol­umes and cash flow will re­turn to nor­mal lev­els … be­cause some of the fac­tors driv­ing re­cent strong per­for­mance, such as gains in in­sur­ance cov­er­age and strong pa­tient vol­ume growth, will not be re­peated in 2016,” Moody’s an­a­lysts wrote in De­cem­ber.

Nonethe­less, de­mand won’t evap­o­rate. “Those trends don’t ap­pear quickly, nor do they dis­ap­pear quickly,” Bill Ruther­ford, chief fi­nan­cial of­fi­cer of HCA, told an­a­lysts in De­cem­ber.

Mean­while, an­other ma­jor con­trib­u­tor to faster spend­ing growth will be as strong or stronger in 2016. Phar­ma­ceu­ti­cal man­u­fac­tur­ers have fo­cused on de­vel­op­ment of spe­cialty drugs. The in­tro­duc­tion of new hep­ati­tis C drugs proved that spe­cialty drug spend­ing can soar as pricey, high-de­mand med­i­ca­tions hit the mar­ket.

The spend­ing surge from hep­ati­tis C drugs, how­ever, has likely hit a plateau, con­tribut­ing to a slower growth rate next year, Roehrig said.

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