The growth in national health expenditures is expected to average 5.6 percent annually over 2016-2025, according to a report from the CMS Office of the Actuary. Health care spending is projected to grow 1.2 percentage points faster than gross domestic product (GDP) during this period. As a result, the health share of GDP is expected to rise from 17.8 percent in 2015 to 19.9 percent by 2025. This growth in national health expenditures is driven by a projected faster growth in medical prices, offset by a projected slowdown in the use of medical goods and services. The projections in the report are based on current law and do not assume potential legislative changes by the new administration.
The report also projects health care spending to grow 5.4 percent in 2017, due to faster growth in Medicare and private health insurance spending; and at an average rate of 5.9 percent for 2018-19, as projected growth in Medicare and Medicaid accelerates. For 2020-25, an average growth of 5.8 per year is projected, due to the deceleration in growth in the use of medical goods and services.
ACA-related findings. Although the largest health insurance coverage impacts from the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) have already been observed in 2014-15, the report projects the insured share of the population to increase from 90.9 percent in 2015 to 91.5 percent in 2025. The report attributes this increase to continued growth in private health insurance enrollment, in particular for employer-sponsored insurance, during the first half of the decade.
The report also projects that national health spending growth decelerated from 5.8 percent in 2015 to 4.8 percent in 2016 as the initial impacts associated with the ACA expansions fade. In addition, Medicaid spending growth is projected to have decelerated sharply from 9.7 percent in 2015 to 3.7 percent in 2016 as enrollment growth in the program slowed. Similarly, it is projected that private health insurance spending slowed from 7.2 percent in 2015 to 5.9 percent in 2016.
Payer findings. Additional report findings regarding payers include:
- Medicare. Medicare spending is projected to grow at an average rate of 7.1 percent for 2016-25, 7.6 percent for 2020-2025, and 8 percent for 2020.
- Medicaid. Following consecutive years of expected slow growth of 3.7 percent in both 2016 and 2017, Medicaid spending growth is projected to quicken and average nearly 6 percent through 2025.
- Private health insurance. Enrollment in private health insurance is projected to average 0.5 percent in growth for 2016-25; 5.7 percent for 2018 through 2019; and at an average rate of 5 percent per year for 2020 through 2025.
- Out-of-pocket. Out-of-pocket spending growth is projected to accelerate 3.6 percent in 2016 from 2.6 percent in 2015; grow 4.8 percent for 2016 through 2025; steadily increase to a high of 5.8 percent in 2020; and then average 5 percent growth in the final years of the period.
Health sector findings. Major report findings by health sector include:
- Hospital. Total hospital spending is projected to grow at an average rate of 5.5 percent per year for 2016-25, compared to 4.9 percent for 2010-15.
- Physician and clinical services. Growth in spending on physician and clinical services is projected to have accelerated slightly in 2016 to 6.6 percent, from 6.3 percent in 2015. It is projected to slow to 5.9 percent in 2017.
- Prescription drugs. Prescription drug spending growth is projected to decelerate from 9.0 percent in 2015 to 5.0 percent in 2016 due to reduced use of newly approved specialty drugs, as well as an increase in the number of brand name drugs losing patent protection. It is projected to grow an average of 6.3 percent per year for 2016 through 2025.
Government spending. The report found that health care spending financed by federal, state, and local governments is projected to have grown 4.4 percent to $1.5 trillion in 2016; and is projected to increase to 47 percent of national health expenditures by 2025 (up from 46 percent in 2015).
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