Healthcare Spending Expected to Increase as Share of Economy

  • By Rebecca O'Rork
  • 10 Feb, 2017

The Affordable Care Act continues to influence health spending growth and consumers’ out-of-pocket medical costs are also increasing.

National health spending, including Medicare, medical price growth and prescription drugs, is expected to grow over the next decade, but at a rate lower than the average of the last two decades.

The national health spending is projected to increase at an average rate of 5.8 percent per year from 2015-2025, according to a report from the Centers for Medicare and Medicaid Services Office of the Actuary .

“The Affordable Care Act continues to keep overall health spending growth at a modest level and at a lower growth rate than the previous two decades. This progress is occurring while also helping more Americans get coverage, often for the first time,” said CMS Acting Administrator Andy Slavitt in a news release. “Per-capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems.”

CMS also reports health spending is projected to increase 1.3 percentage points faster than the Gross Domestic Product per year from 2015 to 2025. “As a result, the health share of the GDP is expected to rise from 17.5 percent in 2014 to 20.1 percent by 2025,” according to the CMS.

The report also includes findings on Medicare, Medicaid, out-of-pocket costs for consumers and expenses for hospitals and physicians.

The share of health expenses consumers pay out-of-pocket is expected to decline from 10.9 percent in 2014 to 9.9 percent in 2025.

Medicare spending growth slowed to 4.6 percent in 2015, in part due to declines in physician incentive payments, reduced utilization of hospital services and deceleration in spending on medicine, according to CMS.

“After 2015, Medicare spending growth is projected to accelerate to a projection-period peak of 7.9 percent in 2020 (and average growth of 7.6 percent for 2020 through 2025,)” according to CMS. Estimated annual enrollment gains as more Baby Boomers approach the age for Medicare eligibility and increasing growth in beneficiary spending are expected to influence the Medicare growth rate.

Growth in consumers' out-of-pocket spending is expected to continue to increase annually through 2018, “as the impact of the coverage expansions from the Affordable Care Act subsides, and as the number of individuals covered through high-deductible health plans continue to grow,” according to CMS.

CMS also reports hospital price growth is expected to increase from 0.9 percent in 2015 to 2.8 percent by 2019. Total hospital spending is expected to have accelerated from 4.1 percent in 2014 to 4.9 percent in 2015 due to the continued influence of the Affordable Care Act's insurance growth on utilization, according to CMS.

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