Health Care Spending to Double by 2015

WASHINGTON–Spending on national health care will double by
2015, reaching some $4 trillion yearly, according to a CMS study
released last week and published in the online journal Health
Affairs.

Main factors contributing to the increase are the aging of the
population and changes in medical technology and utilization, the
agency said.

The study, based on data from 2004, anticipates the nation’s
health expenditures will reach more than $2 trillion this year,
with expenditures increasing at an average rate of 7.2 percent each
year over the next decade–a rate 2.1 percentage points faster than
the projected annual growth rate for the Gross Domestic
Product.

By 2015, the health share of the GDP is projected to reach 20
percent, compared to 16 percent in 2004.

Overall, the nation’s health care spending has slowed, the study
found, decreasing from 7.9 percent in 2004 to an anticipated 7.4
percent for 2005, with a growth rate of 7.3 percent projected for
2006. The growth rate reached a high of 9.1 percent in 2002. CMS
said an expected drop in personal health care spending underlies
the slowdown.

Other findings in the study include the following:

— Home health spending growth is expected to remain strong in
2005 at 13.2 percent, following 13.3 percent growth in 2004, with
public payers–particularly Medicare–driving this trend. While
growth of 15.3 percent for Medicare home health services in 2005
would mark the fifth consecutive year of double digit growth, CMS
said, the agency expects that trend to moderate and average 6.9
percent from 2007-2015. Growth in home health services provided by
Medicaid is expected to grow to 18.6 percent in 2005, and grow at
an average rate of 10.9 percent between 2007 and 2015.

–Combined federal and state Medicaid spending growth is
expected to slow, for the fourth consecutive year, to 7.7 percent.
Medicaid enrollment growth is expected to decelerate in 2005 to 2.1
percent from 4.2 percent in 2004, but per enrollee spending is
expected to increase 2.8 percent in 2005.

–After slowing slightly from 8.9 percent in 2004 to 8.6 percent
in 2005, Medicare growth is expected to have a one-time increase of
25.2 percent as a result of the new Medicare prescription drug
coverage. This is significantly less growth than had been forecast
previously, as a result of new projections of the Medicare drug
benefit budget cost declining by 20 percent for 2006. Thereafter,
Medicare growth is expected to slow to 5.4 percent in 2007 and then
accelerate to 8.8 percent by the end of the projection period.

To access the health care spending projection data,
click here.