Health Affairs: Health care spending to grow faster than GDP

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Health care spending in the United States is expected to grow at an average annual rate of 5.7 percent for the next 10 years, according to estimates from the Office of the Actuary at the Centers for Medicare and Medicaid Services.

That’s 0.9 percent higher than the expected growth in the gross domestic product, according to an article in Health Affairs. The health care share of GDP by 2021 is expected 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 recent recession and the modest economic recovery have played a role in our projection of near historic lows in health-spending growth through 2013,” said 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 Affordable Care Act is going to drive up costs in 2014, raising levels to 7.4 percent.

According to the Health Affairs report, key national health expenditure projections for specific timeframes include the following:

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.

• 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.

• The Affordable Care Act is also expected to influence growth rates for the major payors, 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 higher than 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.