- Health Affairs Blog - http://healthaffairs.org/blog/ -

Health Spending Growth Projected To Average 5.7 Percent Annually Through 2021

Posted By Chris Fleming On June 12, 2012 @ 3:14 pm In All Categories,Health Reform,Medicaid,Medicare,Pharma,Physicians,Spending | 6 Comments

New estimates released today from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) project that aggregate health care spending in the United States will grow at an average annual rate of 5.7 percent for 2011 through 2021, or 0.9 percentage point faster than the expected growth in the gross domestic product (GDP). The health care share of GDP by 2021 is projected to rise to 19.6 percent, from its 2010 level of 17.9 percent.

By 2021, government spending at all levels for health care is projected to reach nearly 50 percent of total national health expenditures, with the federal government accounting for approximately two-thirds of that share.

The findings can be accessed as a Health Affairs Web First article [1]  and will also be published in the July issue. The full article provides an analysis of how Americans are likely to spend their health care dollars in the coming decade, with projections for spending by different sectors, payers, and sponsors.

The projections reflect various factors that can affect health care spending, including an aging population. Relatively slower economic growth is also expected to affect spending on health care, with modest growth in disposable personal incomes, insurance coverage, and employment rates all limiting expenditures through next year. “The recent recession and the modest economic recovery have played a role in our projection of near historic lows in health spending growth through 2013,” says Sean Keehan, the lead author of the study. “However, other factors such as Medicare payment cuts under current law and the patent expirations of several top-selling brand-name drugs have led to projected health spending growth staying at about 4 percent during this period.”

The major effects of the Affordable Care Act on overall spending levels are expected to be felt most acutely in 2014. The coverage expansions associated with the Affordable Care Act for Medicaid and private health insurance are expected to increase the growth rate for health spending to 7.4 percent in 2014, with notable increases in spending on physician services and prescription drugs by the newly insured. Throughout the latter half of the projection period, incomes are expected to be higher, and a large number of baby boomers are anticipated to be receiving coverage under Medicare. Among others, these factors are expected to drive health spending up around 2 percentage points faster than overall economic growth by 2020, consistent with trends in the United States for about the past thirty years.

Key national health expenditure projections for specific timeframes include the following:

2011 (final data to be available in January 2013)

  • Preliminary assessments indicate a continued near-historic low of a 3.9 percent growth rate in spending, with total expenditures of $2.7 trillion and a stable share of GDP at 17.9 percent.
  • Health spending financed or sponsored by federal, state, and local governments is estimated to have grown 6.4 percent, and to have reached $1.2 trillion. Health spending by businesses, households, and other private sources is estimated to have risen just 1.9 percent in 2011, and to have reached $1.5 trillion.

2012–2013

  • National spending on health care is projected to grow 4.2 percent in 2012, and then slow to 3.8 percent growth in 2013 (due in part to the 30.9 percent reduction in Medicare physician payment rates called for under current law).
  • Growth in prescription drug expenditures is expected to slow from 3.9 percent in 2011 to 2.9 percent in 2012, and then to 2.4 percent in 2013, as several top-selling blockbuster drugs lose patent protection.

2014

  • As the major provisions of the Affordable Care Act go into effect in 2014, including health care coverage expansions, projected growth in spending is 7.4 percent, compared to 5.3 percent growth without these reforms.
  • Many of the 22 million newly insured are anticipated to be generally younger and healthier, and are expected to devote a larger share of their health care spending to prescription drugs and physician and clinical services, and a smaller share to hospital spending.
  • The Affordable Care Act is also expected to influence growth rates for the major payers, with a rise in private health insurance spending to 7.9 percent and a decrease in individual out-of-pocket spending by 1.5 percent.
  • Medicaid enrollment is expected to increase by 19.6 million people in 2014, with total Medicaid spending projected to grow 18 percent.

2015–2021

  • National health spending is projected to grow at an average rate of 6.2 percent per year for this period. Medicare expenditures are projected to grow an average of 6.8 percent per year for 2015 through 2021.
  • Medicaid expenditures are projected to grow at an average rate of 7.4 percent per year, as total enrollment in the program is expected to reach 85 million. Medicaid is projected to account for about 20 percent of all health expenditures, an increase of about 5 percentage points over the 2010 share.
  • The Affordable Care Act’s tax on high-cost employer-based insurance plans will take effect in 2018, and is expected to place further downward pressure on private health insurance premium growth.

In addition to examining the effects of national health reform legislation, the report discusses the impact of higher cost sharing on private health insurance and out-of-pocket health spending. It also examines the effect on Medicare and physician health spending growth if the significant reduction in Medicare physician payment rates in 2013 under current law is overwritten.


Article printed from Health Affairs Blog: http://healthaffairs.org/blog

URL to article: http://healthaffairs.org/blog/2012/06/12/health-spending-growth-projected-to-average-5-7-percent-annually-through-2021/

URLs in this post:

[1] can be accessed as a Health Affairs Web First article: http://content.healthaffairs.org/content/early/2012/06/11/hlthaff.2012.0404