Healthcare Spending Grows Modestly Among Commercially Insured, Except for Drugs

Overall healthcare spending among patients who get their health insurance from an employer grew at a tepid rate in 2014, but spending on prescription drugs jumped significantly, stemming almost exclusively from pricey hepatitis C drugs.

The latest report from the Health Care Cost Institute called out three hepatitis C drugs—Johnson & Johnson’s Olysio and Gilead Sciences’ Harvoni and Sovaldi—as the main source of higher spending on brand-name pharmaceuticals. The drugs hit the market in late 2013 and 2014 and have been pariahs in the national debate over rising drug prices.

Although the use of brand-name drugs declined in 2014 and past years as more people use cheaper generics, the prices have skyrocketed, which led to an 8.2% increase in brand-name drug spending, according to the HCCI report.

Most people with employer-based insurance don’t have hepatitis C. HCCI data show the number of filled prescription days for Olysio, Harvoni and Sovaldi was very low. But the average price per day of those drugs was more than $983, compared with $38 per day for all other anti-infective drugs.

“Hepatitis C usage is quite low in comparison to the use of other drugs,” said Amanda Frost, senior researcher at HCCI. “But we saw a pretty sizable increase on brand price, and we can attribute a lot of that to these three drugs.”

Overall spending on hospitals, doctors and drugs went up by 3.4% in 2014, the first year in which health coverage expanded under the Affordable Care Act, according to HCCI. The annual report used claims data from several large commercial insurers that covered more than a quarter of the country’s 150 million privately insured people.

The 3.4% growth rate was up from 3% in 2013 and 3.3% in 2012. (HCCI originally documented a 3.9% growth rate in 2013 but revised the figure down after gaining more data.) The CMS said this summer that the amount the entire country spent on healthcare in 2014 was about 5.5% higher than the year before.

Patients continued to visit hospitals and doctor offices less frequently in 2014 than before 2008. The recent recession stunted the demand for care, and people with employer coverage still aren’t using healthcare services like they used to do.

“What has been interesting is this ongoing trend of declining utilization after the recession,” Frost said. Lower utilization coupled with modestly higher prices is “why we’re seeing healthcare spending growth look steady.”

Out-of-pocket spending for the commercially insured grew only 2.2% in 2014. The average person spent $810 per year out of pocket on healthcare expenses.

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