Healthcare spending to reach 19.7% of GDP within a decade
- National health spending in the U.S. is projected to increase 5.5% annually on average from 2017-2026, the Office of the Actuary at CMS estimates.
- The increase is 1 percentage point above the expected GDP growth rate during the same time period. The data, newly published in Health Affairs, forecast healthcare will represent 19.7% of the economy by 2026, up from 17.9% in 2016.
- Hospital care spending growth is expected to increase 5.5% on average between 2017 and 2026, the researchers reported.
Despite uncertainty about the health system generated by the political fight over the Affordable Care Act, growth over the next decade will largely be driven by economic and demographic factors. These include changes in projected income growth, increases in medical prices and a shift in insurance enrollment from private health insurance to Medicare due to the aging U.S. population.
Federal, state and local governments are projected to shoulder 47% of health spending by 2026.
For the major payers, Medicare is expected to grow 7.4%, Medicaid 5.8% and private health insurance 4.7%.
A large reason is the aging population. People aging into Medicare will shift demographics in both Medicare and private insurance enrollment. This shift, Health Affairs' Editor-in-Chief Alan Weil noted during a media briefing, helps improve the insurance risk pool for both the demographics.
Relatively younger and healthier people will enter the Medicare market and leave the private market to younger, healthier generations such as millennials. This shift contributes to the faster growth in federal healthcare spending and slower spending growth in the private payer market.
The average growth in prices for all medical goods and services (2.5%) and use and intensity (1.7%) is expected to account for roughly 75% of the healthcare spending growth in the next decade:
The number of insured Americans rose in the wake of the ACA. Many had never had insurance before and sought out care they had previously delayed. As a result, use and intensity of healthcare services drove healthcare spending from 2014-2016.
After the initial coverage bump, CMS projects the number of insured Americans to decline from 91.1% in 2016 to 89.3% in 2026. The projections were constructed using current-law framework and do not assume potential legislative changes over the projection period. As such, the major impacts of ACA coverage expansions have been realized in contributing to use and intensity of healthcare spending growth.
CMS predicts the effects of high deductible health plans (HDHPs) and income growth will the main drivers of use and intensity of private health insurance costs in the next decade. As more costs are shifted onto the consumer via HDHPs, individuals may forgo seeking healthcare services.
"The recent enactment of tax legislation that eliminated the individual mandate is expected to result in only a small reduction to insurance coverage trends," the researchers wrote.
Among healthcare goods and services, prescription drug spending is predicted to rise the fastest during the period at 6.3 percent. The culprit is faster growth in drug prices, in large part attributed to spending on specialty drugs, the researchers said.
Such growth is anticipated to accelerate from 2.9% in 2017 to 6.6% in 2018, based on the expectation that the dollar value of drugs losing patent protection is less than in previous years.
Hospital care spending growth is expected to increase 5.5% on average between 2017 and 2026, the researchers reported. It will rise from $937.6 million in 2013 to $1.85 billion in 2026.
Editors note: This story has been updated with additional details.
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