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Spending estimates reveal projected trends in healthcare

New estimates from the Office of the Actuary at the Centers for Medicare and Medicaid Services project aggregate healthcare spending in the U.S. will grow at an average annual rate of 5.8% for 2012-22, or 1 percentage point faster than the expected growth in the gross domestic product.

The healthcare share of GDP by 2022 is projected to rise to 19.9% from its 2011 level of 17.9%, according to the report, which was published Sept. 18 on the website of the journal Health Affairs.

The projections reflect a combination of factors affecting healthcare spending, including provisions of the Affordable Care Act that increase health insurance coverage and forecasted changes in the nation’s economy.

Key national health expenditure projections for specific time frames include the following:


National spending on healthcare is projected to remain below 4% in 2013 as consumers remain sensitive to rising health costs and businesses seek to restrain costs. In line with this, private health insurance spending is expected to slow to 3.4%.

Medicare spending is projected to grow 4.2% in 2013, down from 4.6% in 2012, because of the 2% reduction in Medicare provider payments mandated in the Budget Control Act of 2011, (commonly known as sequestration).


As the major provisions of the ACA go into effect, including healthcare coverage expansions, projected growth in spending is 6.1%, compared with 4.5% growth without these reforms.

Many of the 11 million newly insured are anticipated to be generally younger and healthier, and are expected to devote a larger share of their healthcare spending to prescription drugs and physician and clinical services and a smaller share to hospital spending.

The ACA also is expected to influence growth rates for the major payers, with a rise in private health insurance spending to 7.7% and a decrease in individual out-of-pocket spending by 1.5%.

Medicaid enrollment is expected to increase by 8.7 million people in 2014, with total Medicaid spending projected to grow 12.2%, to $490 billion. Nearly all the projected growth is because of the ACA’s expansion of coverage.


National health spending is projected to remain near 6% in 2015 because of two main factors: 8 million more Americans will gain insurance coverage through Medicaid or the individual insurance marketplaces during this time span; and the expected pace of the economic recovery will increase in 2014-15, with projected growth in the GDP exceeding 5% for the first time since 2006, according to the report. The resulting gains in disposable personal income will drive increased use of healthcare goods and services.

The most significant one-time effects of coverage expansions will subside starting in 2016. As a result, projected total health spending growth for 2016-18 largely will be influenced by an improving economy and increases in disposable income and medical spending. Health spending growth per capita is projected to average 5% annually for 2016-18, compared with per capita GDP growth of 4.7%.

Medicare expenditures are projected to grow an average of 7.9% per year for 2019-22, compared with 7.3% per year for 2016-18, as baby boomers continue to enroll in the program.

An additional 8.8 million people are projected to enroll in Medicaid by 2016 because additional states are expected to expand their Medicaid programs after 2014. Medicaid spending is projected to grow by 7.9% on average in 2015 and 2016. From 2017-22 Medicaid spending is expected to grow 6.6%, primarily because of the increasing proportion of elderly and disabled Medicaid beneficiaries.

Private health insurance spending will remain somewhat elevated in 2015, at 6.2%, primarily because of continued enrollment through the exchanges, through employer-offered coverage and increased use of medical goods and services spurred by faster economic growth. For 2016-22 the effects of improved economic conditions are expected to result in average private health insurance spending growth of 5.8% per year.

By 2022, healthcare financed by federal, state and local governments is projected to account for 49% of total national health expenditures and reach a total of $2.4 trillion. The federal government will account for more than 63% of this total, or about $1.5 trillion, reflecting expanded Medicaid eligibility, premium and cost-sharing subsidies through the individual insurance marketplaces and growth in Medicare enrollment as baby boomers continue to enter the program.

Report abstract:


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By | 2013-09-28T00:00:00-04:00 September 28th, 2013|Categories: National|0 Comments

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