The Office of the Actuary at CMS project an average rate of national health spending growth of 5.6 percent for 2016-25. This is expected to outpace the average projected growth in GDP by 1.2 percentage points. As a result, the health share of the economy is projected to climb to 19.9 percent by 2025—up from 17.8 percent in 2015.
Growth in national health spending is expected to be driven by projected increases in medical prices from a low of 0.8 percent in 2015 to nearly 3.0 percent by 2025. Growth in the use and intensity of medical services is projected to slow since ACA’s coverage expansion is expected to wane and enrollment growth in Medicaid and private insurance is expected to slow.
Also, changes in the age and sex distribution of the population are projected to consistently put upward pressure on growth which will contribute an average of about 5 percentage points to growth per year.
The first two years of the projection period are expected to have the slowest health spending growth rates as Medicaid and private health insurance spending growth slows and Medicare spending growth remains low.
For 2018 and beyond, Medicare and Medicaid expenditures are expected to grow faster than in the 2016-2017 period and more rapidly than private health insurance spending. Sean Keehan and the other co-authors of study site several reasons why this will happen.
First, the use of Medicare services is expected to increase from its recent historical lows. Second the Medicaid population mix will trend more toward older, sicker, and more costly beneficiaries. Third baby boomers will continue to age into Medicare with some dropping private insurance. Finally, growth in the demand for healthcare for those with private insurance is expected to slow as enrollees face gradually rising relative healthcare prices and slowing income growth.
Go to http://content.healthaffairs.org/looup/doi/10.1377hlthaff.2016.1627 for the new findings appearing as a Health Affairs Web First article. The study will also be published in the journal’s March 2017 issue www.healthaffairs.org to be released Monday, March 6, at 4:00 pm ET.