Health Care Spending's Recent Surge Stirs Unease

WASHINGTON - It's back.

For years, because of structural changes in the health care delivery system and the deep economic downturn, the health care 'cost curve' - as economists and policy makers call it - had bent. Health spending was growing no faster than spending on other goods or services, an anomaly in 50 years of government accounts.

But perhaps no longer. A surge of insurance enrollment related to rising employment and President Obama's health care law has likely meant a surge of spending on health care, leaving policy experts wondering whether the government and private businesses can control spending as the economy gets stronger and millions more Americans gain coverage.

'Following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. health care system,' Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a statement.

The news comes as President Obama promotes the success of the Affordable Care Act in covering more Americans at less cost than anticipated.

'Under this law, real Medicare costs per person have nearly stopped growing,' Mr. Obama said at a news conference on Thursday as he announced that eight million people had signed up for insurance coverage through the law's exchanges.

'Those savings add up to more money that families can spend at businesses, more money that businesses can spend hiring new workers,' he said, adding that the government's budget scorekeeper 'now says that the Affordable Care Act will be cheaper than recently projected.'

But some health care experts and economists said that an expanded use of the health system might start to have the opposite effect. Americans feeling more economically confident might demand more procedures from doctors and hospitals. Insurers paying more money for those procedures might, in time, increase premiums, cutting into wage gains. The government might end up spending more on the health law than current projections imply.

'We knew this was coming,' said Douglas Holtz-Eakin, a former head of the Congressional Budget Office and a prominent Republican economist, of rising spending because of the coverage expansion and improving economy. 'The question now is whether we can hold spending down.'

Many other analysts said they had long expected health spending to increase. 'If we are seeing an uptick, it's the beginning of the uptick,' said Drew Altman, the president of the Henry J. Kaiser Family Foundation. 'We've expected to see a lagged effect, both when the economy declines and when it improves.'

The question is whether health spending might grow moderately, with a one-time bump from new Affordable Care Act enrollees, or whether it might surge, with potentially damaging consequences for the fiscal deficit and wages. Economists from both the right and left - including in the White House - have said that there is no greater threat to the government's budget than soaring health spending.

Rising insurance premiums would increase the cost of the health law's expansion. More broadly, experts have warned that the excess growth of health costs could increase the country's debt and crowd out spending on all other priorities, including education, infrastructure, research and development and support for low-income families.

The pace of health spending growth started falling in the mid-2000s and reached historical lows over the last five years. The recession counts for much or even most of the decline, economists think, as workers lost their jobs and their health coverage, and budget-conscious families chose to reduce their out-of-pocket spending.

But at the same time, structural changes to how health care gets delivered and paid for - changes made by the government, insurers, doctors and hospitals - also helped hold spending down. Many insurers, for example, began charging much higher co-pays and deductibles, spurring their enrollees to use less care.

Now, health experts said, two big trends are pushing health spending back up again. 'Expanded coverage is happening simultaneously with the petering out of the recession's dampening effect,' said Charles Roehrig, the director of the Center for Sustainable Health Spending at the Altarum Institute. 'It's going to be hard to demonstrate how much is due to expanded coverage, versus just the economy recovering.'

The data remains preliminary and has not yet provided a clear picture of why health spending is climbing - let alone how much it might climb, analysts warned. 'We have a handful of data points,' said David Cutler, a Harvard professor and former economic adviser to Mr. Obama. 'You want a couple hundred, and we just don't have them - we can't delve deeper yet.'

Even so, all early reports point in the same direction: more money for health care. A report from IMS, a health care data and analytics firm, found use of the health care system increasing broadly in 2013. Americans made more visits to doctors' offices, were hospitalized more often and purchased more prescription medication.

A separate report from the Altarum Institute, a nonprofit research group, also shows that health spending started to climb last summer. This February, spending growth reached a seven-year high.

Government data seem to paint a similar picture, with the annual pace of spending growth on health care increasing to 5.6 percent in the fourth quarter of 2013, from 1.3 percent in the first quarter. That 5.6 percent growth rate is the highest since 2004.

Cognizant of the need to keep health spending per enrollee down, Democratic policy makers included a number of provisions in the health care law to encourage insurers to move away from fee-for-service medicine and to stamp out unnecessary costs. But critics - and even many supporters - of the law have repeatedly said it might not be enough.

'This is a criticism I've had of the A.C.A. going back years - this is not revisionist history,' Mr. Holtz-Eakin said. 'I thought it was too heavy on the insurance expansion and too light on delivery-system reform. It has tons of projects and demonstrations. But the road to hell is paved with projects and demonstrations.'

Jason Furman, the chairman of the White House's Council of Economic Advisers, cautioned against reading too much into a small number of reports, pointing to a wealth of other data showing that premiums and the price growth of medical goods and services remained low.

'Even if only one-third of the slowdown is sustained,' he said, 'we will be spending $1,200 less per person on health care after a decade.'