CMS Projects 5.5% Annual Rise in Healthcare Spending Over the Next Decade

February 2019 ~

A recent analysis by CMS projects that government spending on healthcare will increase an average of 5.5% annually over the next 10 years. CMS’s Office of the Actuary projected that healthcare spending will exceed $5.9 trillion in 2027, representing 19.4% of the gross national product.

According to the report, published by Health Affairs on February 20^th, national healthcare spending increased by approximately 4.4% in 2018. The Office suggests that following a ten-year period “largely influenced by the Great Recession and major health reform”, national health spending growth over the next ten years will be determined primarily by “long-observed demographic and economic factors fundamental to the health sector”.

The OAC report states prices for health care goods and services are anticipated to increase an average of 2.5%, per year, through 2018–2027 to account for nearly half of projected personal health care spending growth. The report suggests that among major payers, the average annual spending growth in Medicare (7.4%) is expected to exceed that in Medicaid (5.5%) and private health insurance (4.8%) over the projection period, mostly as a result of comparatively higher projected enrollment growth. The OAC predicts the insured share of the population will “remain stable at around 90% throughout the period, as net gains in health coverage from all sources are projected to keep pace with population growth”.

Other key findings and predictions within the OAC report include:

• Out-of-pocket expenditures will grow at an average rate of 4.8% over the coming ten years and will account for 9.8% of total spending by the end of the period;
• Prescription drug spendinggrowth is expected to increase to an average of 5.6%;
• An anticipated 5.6% average increase in hospital spending growth;
• An estimated 5.4% annual growth in physician and clinical service spending;
• A decline in the share of the population with health insurance, from 91.1% (2016) to 89.3;
• Government-sponsored efforts are expected to represent 47% of all health care expenditures by 2026 (up from the current 45% share);
• The portion of expenditures shouldered by private insurance is predicted to drop from 55% to 53% by 2026;

Lead author of the Health Affairs study and economist in the OAC, Andrea Sisko, stated in a press release, “As a result of economic and demographic trends, we expect health spending growth to increase over this next decade. While Medicare spending is expected to accelerate the fastest among payers and contribute to the increase, growth in health prices and disposable personal income are also significant contributors.”

View the full report released by the OAC, here.

Source(s): Health Affairs; RevCycleIntelligence; Modern Healthcare; Healthcare Leaders Media;