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Obamacare, Pricey New Drugs Send Up US Health Spending

Health spending grew by more than 5 percent in 2014, a government study finds. JIM YOUNG / Reuters

Obamacare and pricey new drugs for hepatitis, cancer and multiple sclerosis helped drive U.S. health spending to new highs, government researchers reported Wednesday.

Health spending grew by 5.3 percent to $3 trillion in 2014, experts at the Center for Medicare and Medicaid Services (CMS) found. That’s the biggest growth in five years, but much of it was to be expected as 17 million people got coverage for health care for the first time in years.

Americans now spend $9,523 per person a year on medical expenses – by far the most among developed countries.

"The introduction of new hepatitis C drugs contributed to rapid growth in retail prescription drug expenditures."

Every year, actuaries at CMS assess U.S. health spending and compare it to recent years. They also look at what drives it. They saw a spurt for 2014.

“The previous five years saw historically low growth, which averaged 3.7 percent; in 2013, growth was 2.9 percent,” they wrote in their report, published in the journal Health Affairs.

“The faster growth in 2014 that followed five consecutive years of historically low growth was primarily due to the major coverage expansions under the Affordable Care Act, particularly for Medicaid and private health insurance, which contributed to an increase in the insured share of the population,” they added.

“Additionally, the introduction of new hepatitis C drugs contributed to rapid growth in retail prescription drug expenditures, which increased by 12.2 percent in 2014.”

Just this week, a Senate committee issued a report saying that Gilead Sciences, the maker of two expensive hepatitis C drugs, put its profits first in charging $1,000 a pill for the drugs.

It said state Medicaid programs nationwide spent $1.3 billion on the drugs in 2014.

A report issued in May found that insurance companies for half a million Americans spend $50,000 or more a year on prescription drugs, and a group of cancer specialists complained that all new cancer drugs approved by the Food and Drug Administration in 2014 cost more than $120,000 a year.

The new CMS report sees a large increase in the growth in spending by private health insurance, which covered just under 190 million Americans in 2014, up from 187.7 million the year before.

"More people are covered and getting the health care they need."

“Total private health insurance spending growth accelerated from 1.6 percent in 2013 to 4.4 percent in 2014, driven in part by the expansion of health insurance coverage under the Affordable Care Act,” the report reads. Private health insurance companies spent $991 billion on patients in 2014, accounting for one-third of total national health care expenditures.

It's not surprising, "given that more people are covered and getting the health care they need," said Richard Frank, who's in charge of planning at the Health and Human Services Department.

“Spending per enrollee grew just 3.2 percent in private insurance and 2.4 percent in Medicare, both of which are less than half the rates recorded over the decade before the Affordable Care Act," Frank said in a statement.

Enrollment in Medicaid, the joint state-federal health insurance plan for low income people, grew by 7.7 million people – a 13 percent growth rate. Spending grew by 11 percent to nearly $496 billion.

But its spending per person actually fell by 2 percent.

Medicare, the federal health insurance plan for people over 65, spent nearly $619 billion, 5.5 percent more than in 2013.