A series of news reports over the past weeks have trumpeted the low rate of growth in healthcare costs.
“Health care spending grows at lowest-ever rate,” declared USA Today.
“Growth in health care costs flat, but will it last?” asked the Houston Chronicle.
“Health Spending Rises Only Modestly,” said read a slightly more tempered headline in the New York Times.
From a quick glance at the headlines, one could easily be forgiven for assuming that healthcare costs – long painted as the bane of businesses and families alike – are finally starting to come down. On the left, some have been quick to point to the Affordable Care Act as the source of this boon. On the right, others have cited a persistently weak economy.
But lost in all of the chatter are two important points: first, that overall healthcare spending in the United States continues to rise faster than the rate of inflation; and second, that healthcare premium costs for businesses are rising as well.
Some of the confusion comes from using similar terms to describe very different numbers. National healthcare spending refers to the total amount spent every year by all payers: individuals, governments, businesses – everyone – on healthcare. For 2013, this number was $2.9 trillion.
Healthcare cost growth refers to the rate at which the national spending is increasing. In 2013, this was 3.6 percent. That’s the lowest rate of increase since 1960 when the government started keeping track of these things – but it’s still more than double the 1.5 percent rate of inflation that we saw in the broader US economy in 2013.
And for private businesses – who pay for health coverage for more than half of all Americans – the numbers aren’t much better. This is because the rate of increase in health insurance premiums is also continuing to rise. From 2013 to 2014, average premium for employer-sponsored family coverage for large employers (those with more than 200 employees) increased by 3.2 percent. Overall, since 2009, premiums for large firms have increased by 26 percent.
Ultimately, the topline numbers announced earlier this month are generally a positive development. But even as the rate of national healthcare cost growth has slowed in recent years, enterprises are still seeing their costs increase, and they still face a business imperative to take control of their healthcare spending.