Spending on Physician Services to Spike Under Affordable Care Act

While the changing landscape of health care is making it increasingly difficult for physician practices to turn a profit, a recent study suggests that the Affordable Care Act (ACA) could change that trend.

According to a study on healthcare spending by economists at the Centers for Medicare and Medicaid Services (CMS), physicians will see a jump in revenue in 2014, when health insurance coverage expands significantly under the ACA.

While 2010 hit a historic low for growth in healthcare spending at 3.9%, the healthcare industry is poised for a decade of substantial growth according to the study.

20% of the Economy in 2020
Under the ACA, healthcare spending in the US will grow an average of 5.8% per year between 2010 and 2020, about one percent higher than the predicted growth of gross domestic product (GDP), according to the CMS study.

The study estimates that 30 million Americans will gain healthcare coverage under the ACA, as individuals and small businesses receive federal assistance to purchase health insurance through state-based exchanges, and Medicaid broadens its eligibility requirements.

By 2020, the CMS estimates healthcare spending as a percentage of GDP will reach 19.8%, an increase of over 2% since 2010. The same projections show public and private healthcare spending will increase from $2.6 trillion in 2010 to $4.6 trillion in 2020.

How the ACA affects Physicians
One of the largest surges in spending is predicted in 2014, when the ACA expands health insurance coverage; public and private spending on physician and clinical services is expected to grow by 8.9%.

Many of the Americans that are newly insured under the ACA will tend to be younger and healthier than those who already have coverage. The CMS study indicates this will initially drive spending growth for physician practices.

“[The newly insured] are expected to use physician services and prescription drugs to a greater extent than hospitals or other more intensive services,” according to the study authors.

While the spike in spending on physician and clinical services in 2014 could be an outstanding year for physicians, the benefits might be short-lived. Spending growth in this category will be outpaced by the healthcare industry as a whole.

The biggest problem facing physicians is the almost 30% Medicare pay cut set to begin in 2012. Unless Congress changes the rule, spending growth in this sector will be stunted that year at a rate of 0.8%, according to the CMS study.

However, the CMS estimates that if Congress replaces the substantial pay cut with Medicare rates based on the physician-favored Medicare Economic Index, spending in this category would increase by 4.5% in 2012, and annual growth through 2020 would increase by 6% instead of 5%.

Now, healthcare providers just have to hope Congress makes the right choice.

How do you think the Affordable Care Act will affect health care? Share your opinion.

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