Report: Excitement over healthcare spending may be overblown

A new industry report suggests healthcare spending may not be rising as fast as the Obama administration says it is. 

Healthcare spending has been down for several years, something many observers pinned to the recession and the slow recovery.

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It’s now definitely on the rise, which could be a sign of an improving economy. But it’s not clear at what rate healthcare spending is growing.

The administration touted a report last month from the Bureau of Economic Analysis (BEA) that suggested healthcare spending rose $50 billion in the first quarter of this year compared to the last quarter of 2013, which amounts to health spending increasing at an annual rate of about 10 percent.

But a new report Thursday from the respected Altarum Institute in Ann Arbor, Mich., which watches healthcare spending, found only a 7.1 percent increase in March compared to March 2013.

The numbers suggest that more people are getting care under ObamaCare, making trips to the doctor's office, buying prescriptions and getting treatment.

That’s generally a good thing, and the spending could also spur wider economic growth.

The danger is if the rise in healthcare spending leads to higher premiums, out-of-pocket costs and taxes. When healthcare spending rises slowly, it holds these costs in check.

Charles Roehrig, director of the Altarum Institute’s Center for Sustainable Health Spending, said spending probably isn’t rising at an annual rate of 10 percent.

He said the BEA's numbers were likely reflecting a surge in people getting covered under the Affordable Care Act (ACA), a trend that won't be repeated in subsequent quarters because open enrollment is over.

The Obama administration touted last month’s numbers as evidence the ACA was a boon to the healthcare industry and the economy in general, but Roehrig said “the jury is still out” on whether healthcare spending will continue to grow or start slowing down.

Thursday’s report also notes healthcare spending as part of the gross domestic product reached an all time high of 17.9 percent in March, and the healthcare industry added 18,700 jobs in April.

— This article was updated at 5:27 pm.