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Health Spending Growth Projected To Average 5.7 Percent Annually Through 2021
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  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)
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.
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