U.S. Health Care Spending Headed to $4.3 Trillion by 2017

WASHINGTON–U.S. spending on health care is expected to double
by 2017, reaching $4.3 trillion and accounting for nearly 20
percent–$1 for every $5 spent–of the gross domestic product,
according to a CMS forecast published in the journal Health
Affairs.

Health care spending is expected to increase by an average of
6.7 percent annually–nearly three times the rate of
inflation–over the next decade, according to the report. And
estimates say health spending per person will cost about $13,101 in
2017, up from $7,026 in 2006 when spending was $2.1 trillion.

Medicare spending will increase to $844 billion in 2017 compared
with $427 billion in 2007. Medicaid spending is expected to more
than double from $338 billion in 2007 to $717 billion in 2017,
accounting for one-sixth of U.S. health care spending by that time,
the report said.

According to CMS, the increases are largely driven by higher
prices and increased demands for care. Another contributing factor
is the aging population.

The report said the “impact of the population aging is expected
… to have a substantial influence on the public share of spending
growth, as the leading edge of the baby-boom generation becomes
eligible for Medicare.”

The oldest baby boomers will turn 65 and begin to enter the
program in 2011.

Home health spending growth is expected to slow, although it
remains one of the fastest-growing health sectors, growing at 7.7
percent annually and reaching $119 billion by 2017. Medicare and
Medicaid, the primary payers in this sector, will account for 84
percent of home health care spending by 2017.

CMS said nursing home spending growth is projected to increase
to 3.8 percent in 2007 and then to accelerate to 5.3 percent
annually through 2017. Medicaid is expected to remain the largest
payer, paying for 43 percent of all such care during the decade.
According to the report, the impact of the baby-boom generation on
nursing home spending is likely to be small, even at the end of the
projection period, since nursing home use is highest for people age
85 and older, and the oldest baby boomers will be just 71 in
2017.

Additional report findings:

–Projected out-of-pocket spending is expected to reach $269.3
billion in 2007 with a growth rate of 5 percent. Growth in this
area is expected to average 6 percent each year to reach $464.3
billion in 2017.
–Physician services and clinical services will grow at a 5.7
percent rate–up to $473 billion–in 2007. Growth rates are
expected to average 5.9 percent per year, down from 6.6 percent
over the past 11 years.
–Hospital spending will increase 7.5 percent in 2007, up from 7
percent in 2006. But over the next 10 years, hospital spending is
expected to decrease as demand for services slows.
–Prescription drug spending will slow to 6.7 percent in 2007 from
8.5 percent in 2006. But for 2008 through 2017, spending will
escalate due to a projected leveling off of growth in the generic
dispensing rate and evolving treatment guidelines that call for
earlier introduction of pharmacotherapy.

Acting CMS Administrator Kerry Weems said the report “reminds us
that we need to accelerate our efforts to improve our health care
delivery system to make sure that Medicare and Medicaid are
sustainable for future generations of beneficiaries and
taxpayers.”

View the report.

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