Health Spending Projections for Next Decade Released

WASHINGTON, D.C. (July 14, 2016)—Total health care spending growth is expected to average 5.8 percent annually over 2015–2025, according to a report published as a “Web First” by Health Affairs and authored by the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary (OACT). Projected national health spending growth remains lower than the average over previous two decades before 2008 (nearly 8 percent).

“The Affordable Care Act continues to help 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. “Per-capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems. As we look to the future we must continue our efforts that keep people healthy, providing access to affordable, quality care, while spending smarter across all categories of care delivery.”

In 2015, medical price growth is estimated to continue to be very low, helping to restrain overall health spending growth. In addition, the Medicare program is testing various alternative payment approaches, which may provide some relief to long-term spending growth, even as a record number of people age into Medicare. Overall, national health expenditures are estimated to have reached $3.2 trillion in 2015.

Health spending is projected to grow 1.3 percentage points faster than Gross Domestic Product (GDP) per year over 2015–2025; as a result, the health share of GDP is expected to rise from 17.5 percent in 2014 to 20.1 percent by 2025. Federal, state and local governments are projected to finance 47 percent of national health spending (up from 45 percent in 2014).

Other findings from the report:

• National health spending growth is estimated to have been 5.5 percent in 2015. By 2016, slower growth in health spending of 4.8 percent is projected as the enrollment in Medicaid and Marketplace plans slows and the associated declines in the number of the uninsured decreases. Total annual health care spending growth is expected to average 5.8 percent over 2015-2025.

• In 2015, medical price inflation slowed to 0.8 percent, down from 1.4 percent in 2014. Hospital prices increased by 0.9 percent while price growth in physician services fell by 1.1 percent.

• The share of health expenses that Americans pay out-of-pocket is projected to decline from 10.9 percent in 2014 to 9.9 percent in 2025.

• The insured share of the population is expected to continue to rise from 89 percent in 2014 to 92 percent by 2025.

• Private health insurance expenditures are estimated to have increased by 5.1 percent from 2014 to 2015, reaching $1.0 trillion. Thereafter, average annual growth through 2025 is expected to be similar (5.4 percent).

• Medicaid spending growth is slowing significantly in 2016, to 5.3 percent, which the report attributes to slower enrollment growth and stronger utilization management. Spending growth is expected to average 5.6 percent for 2017–2019, lower than in 2014–2015.

• In 2015, Medicare expenditures are expected to have been $647.3 billion, a 4.6-percent increase from 2014, driven partly by increased enrollment. However, per-enrollee costs are estimated to have increased by only 2.4 percent, the same as the previous year, continuing the recent trend of low per-enrollee cost increases.
• Prescription drug spending is projected to grow an average of 6.7 percent per year for 2016 through 2025. This follows growth of 12.2 percent in 2014 and 8.1 percent in 2015 when spending growth was influenced by the introduction of expensive new specialty drugs such as those used to treat Hepatitis C.

Find the full report here. Visit cms.gov for more information.