Urban Institute says spending trends on major downturn

Expenditures could be $2.5 trillion less than first projected over remainder of decade
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Despite the recent alarms about healthcare costs creeping up again, a new and extensive study by the Urban Institute suggests that they will continue to remain low in the years to come, with the Affordable Care Act (ACA) playing some yet-to-be fully defined role.

The Centers for Medicare & Medicaid Services projects $2.5 trillion less in public and private healthcare spending between 2014 and 2019 compared to projections made by the agency five years earlier, according to the study, which was funded by the Robert Wood Johnson Foundation.

"Over the 2014-2019 period, Medicare spending is now expected to be lower by $384 billion, Medicaid by $927 billion, and private health insurance expenditures by $688 billion compared to the September 2010 ACA baseline," the report said.

The original baseline projected spending would total $23 trillion between 2010 and 2019. Now it's pegged at $21 trillion. CMS reported that healthcare spending grew by 3.6 percent in 2013.

The report credited the ACA to some extent for the trend, but its authors did not say how much. New legislation can explain some of these changes,, as well as "other policy developments (e.g., the Budget Control Act of 2011 and the Supreme Court decision on Medicaid expansion) that have occurred since the ACA baseline forecast in September 2010. But much of the decline in projected spending for the 2014-2019 period seems to be related to the historically low growth in actual health spending that began with the recession in 2008 and has continued to the present," the report said.

The study contradicts some other reports that healthcare spending has been on the rise in recent months. The Altarum Institute's Center for Sustainable Healthcare Growth said that spending was up more than 5 percent between November 2013 and November of last year. However, that study suggested the trend could be considered temporary. The Financial Times also suggested that spending could rise due to the economic recovery.

To learn more:
- read the Urban Institute study (.pdf)
- check out the Financial Times article

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