Changes in Healthcare Costs During the Obama Administration: Government Spending

A look at the numbers resulting from healthcare reform and the Affordable Care Act across the eight years of the Obama Administration

Over the eight years of the Obama administration, there has been significant and unprecedented legislation intended to address the well-known problems with health insurance and high healthcare costs in this country. There has also been plenty of bluster, criticism, and commentary about the consequences of the Affordable Care Act (ACA), which became law in 2010.

With a new administration and Congress about to take office, many media outlets and experts are looking back over the past eight years to assess what actually happened to the US healthcare system during this time. From independent medical laboratories and pathology groups, to large-scale health systems, reform and the impact of the Obama Administration has changed—and continues to change—the way America approaches healthcare.

Over President Obama’s two terms, there were significant changes to payment structures, insurance markets, and communications between healthcare service providers. In turn, these initiatives have spurred innovation and drastically altered the way many healthcare and diagnostics providers operate.

Now, at the end of the Obama administration, data about the financial impact of healthcare reform offers an unbiased look at the potential true legacy of the past eight years.

The Big Picture—Per Capita and Total Healthcare Spending

Because of the sheer scale of America’s healthcare system, a look at total spending provides a base metric for checking the financial health of our nation’s efforts. National Health Expenditure (NHE) data from the Centers for Medicare and Medicaid Services (CMS) shows that total annual spending between 2008 and 2014 increased by 21.43% or nearly $535 billion.

While official data for the last two years is not available in their latest reports, CMS estimates predict total spending will reach $3.35 trillion by the end of 2016—an additional increase of nearly $326 billion. Should these estimates prove accurate, it brings the total annual increase in healthcare spending across the Obama Administration to approximately $854 billion—or 34.22%.

Another important metric is per capita healthcare spending. Across the initial six years of data available, per capita spending increased from $7,909 per year to $9,523 per year—an increase of 20.41%. Using estimates from the NHE data, this number is expected to reach $10,345 per year in 2016 for a total increase of 30.8% across all eight years.

Breaking Down the Numbers—Yearly Changes to Per Capita and Total Healthcare Spending

Looking at the overall numbers provides a look at where the nation is now. However, these changes are a sum of the smaller trends taking place over the previous eight years.

In the first term of the Obama administration, spending slowed in both per capita and total healthcare spending. Starting at a 4% increase for 2008, the lowest increase of his entire term came in 2013 with an average yearly growth rate for annual total spending of 2.9%. This jumps up in 2014 to 5.3%. This was the largest year-to-year increase in total health spending during the eight years of the current administration.

Per capita spending follows similar trends, starting at an increase of 3.7% in 2010 and reaching the lowest point in 2013—a jump of just 2.1%. As with total spending, in 2015, per capita spending spiked upwards in 2014 with an increase to 4.5%. This increase was the largest year-to-year per capita increase in the administration.

Big Changes for Prescription Drug Spending and Administration Spending

Many of the metrics for national health expenditure (NHE) categories showed stable, consistent growth from year to year with differences between years only amounting to fractions of a percent. However, three NHE categories showed more volatile changes.

Prescription drug spending experienced one of the largest changes amongst all types of spending. Annual increase percentages ranged between 0.1% in 2010 and 12.2% in 2014. Predicted increases show greater stability. However, at 8.1% for 2015 and 6.3% for 2016, prescription drug spending does continue to be one of the fastest increasing expenditure types in the CMS data sets.

The other two areas with drastic fluctuations are local and state administration and federal administration expenditures. Between 2008 and 2011, Federal Administration expenditures increased faster than those at the state and local levels. However, from 2011 to 2014, they both rose and fell in a similar manner.

While not as large as the changes in percentage increases from prescription drug spending, increases ranged from 2.2% in 2010 to 10.7% in 2014—the largest increase by percentage in the Obama Administration. Also, unlike prescription drug costs, NHE predictions show increases stabilizing in near-term projections.

Pathology groups and clinical laboratories will continue to see changes in the landscape of healthcare as changes from the Obama Administration influence spending and other metrics in coming years. Increased competition due to increased focus and developments in precision medicine and adjusting workflows to account for the impact of bundled payments will remain critical concerns.

In the next part of this series, we will look at the impact of spending and the consumers’ cost of healthcare benefits during the same period.

—Jon Stone

Related Information:

Centers for Medicare and Medicaid Services National Health Expenditure Data

Peterson-Kaiser Health System Tracker Health Spending Explorer

National Center for Health Statistics Health Expenditures FastStats