In the JournalsPerspective

Health care spending expected to increase over decade, but at historically low rate

Due to expanded health insurance coverage from the ACA, as well as the aging population and economic growth, health care spending is projected to increase at a rate of 5.8% annually between 2014 and 2024, according to recently published data in Health Affairs. 

However, this annual increase remains low in comparison with the 9% annual increase seen in health care spending prior to 2008’s recession.

“Ultimately, these longer-lasting factors result in relatively modest projected health spending growth over the next decade, averaging close to 6 percent per year (compared to the average annual growth of about 9 percent over the three decades prior to the recession), even during a period when the uninsured population is expected to decline by almost 18 million,” the report stated.

The recently published data from the CMS’s Office of the Actuary predicts that the health care share of the U.S. gross domestic product (GDP) will increase from 17.4% to 19.6% by 2024 as a result of health spending outpacing GDP by 1.1% each year.

The peak of health care spending is expected to occur in 2020, with a 6.3% growth rate.

Spending growth for prescription drugs is expected to average 6.3% annually from 2015 to 2024, mainly from costly drug and device developments, such as newly available hepatitis-C treatments, as well as improved medication coverage and clinical guidelines urging early drug treatment therapies.

As the nation’s older population increases, nearly 4 out of every 10 health care dollars will be spent on individuals enrolled in either Medicare or Medicaid. Nearly 19.1 million enrollees are expected by 2024, according to the report. This will mean that almost half (47%) of national health care spending will be funded by local, state and federal governments.  

“Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels,” Andy Slavitt, CMS Acting Administrator said in a press release. “We cannot be complacent. The task ahead for all of us is to keep people healthier while spending smarter across all categories of care delivery so that we can sustain these results.” – by Casey Hower

Reference:

CMS. National Health Expenditure Projections 2014-2024. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2014.pdf. Accessed July 29, 2015.

Disclosure: Healio.com/Internal Medicine could not confirm relevant financial disclosures at the time of publication.  

Due to expanded health insurance coverage from the ACA, as well as the aging population and economic growth, health care spending is projected to increase at a rate of 5.8% annually between 2014 and 2024, according to recently published data in Health Affairs. 

However, this annual increase remains low in comparison with the 9% annual increase seen in health care spending prior to 2008’s recession.

“Ultimately, these longer-lasting factors result in relatively modest projected health spending growth over the next decade, averaging close to 6 percent per year (compared to the average annual growth of about 9 percent over the three decades prior to the recession), even during a period when the uninsured population is expected to decline by almost 18 million,” the report stated.

The recently published data from the CMS’s Office of the Actuary predicts that the health care share of the U.S. gross domestic product (GDP) will increase from 17.4% to 19.6% by 2024 as a result of health spending outpacing GDP by 1.1% each year.

The peak of health care spending is expected to occur in 2020, with a 6.3% growth rate.

Spending growth for prescription drugs is expected to average 6.3% annually from 2015 to 2024, mainly from costly drug and device developments, such as newly available hepatitis-C treatments, as well as improved medication coverage and clinical guidelines urging early drug treatment therapies.

As the nation’s older population increases, nearly 4 out of every 10 health care dollars will be spent on individuals enrolled in either Medicare or Medicaid. Nearly 19.1 million enrollees are expected by 2024, according to the report. This will mean that almost half (47%) of national health care spending will be funded by local, state and federal governments.  

“Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels,” Andy Slavitt, CMS Acting Administrator said in a press release. “We cannot be complacent. The task ahead for all of us is to keep people healthier while spending smarter across all categories of care delivery so that we can sustain these results.” – by Casey Hower

Reference:

CMS. National Health Expenditure Projections 2014-2024. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2014.pdf. Accessed July 29, 2015.

Disclosure: Healio.com/Internal Medicine could not confirm relevant financial disclosures at the time of publication.  

    Perspective
    Lara Devgan, MD, MPH

    Lara Devgan

    Cost containment is always an important consideration in developing a national budget. However, with the population growing in number, aging, and being diagnosed with more medical conditions (thanks to both more health care surveillance and a higher penetrance of health care among all demographics), it is surprising to see this slowed rate of growth.

    Despite slower growth for healthcare overall, the demand for plastic surgery has continued to increase over time. Exciting medical advancements-- like new fillers to plump the lips, new chemicals to dissolve a double-chin, and new techniques for rapid recovery for breast augmentation and facelifting-- have paved the way for the continued high interest in plastic surgery.

    According to the latest statistics released by the American Society for Aesthetic Plastic Surgery, Americans spent more than 12 billion dollars for surgical and nonsurgical cosmetic procedures in 2014. Over 10 million procedures were performed in 2014, with the most popular being liposuction, breast augmentation, eyelid lift, tummy tuck, and rhinoplasty. While health care growth overall is slower, plastic surgery growth as a niche market continues to rise.

    • Lara Devgan, MD, MPH,
    • Yale-educated, Hopkins-instructed, and Columbia-trained plastic and reconstructive surgeon in private practice in New York City.

    Disclosures: Devgan reported no relevant financial disclosures.

    Perspective

    John B. Pinto

    This article advances a generations-long trend line, which is either very troubling if you consume medical care or cheering if you produce medical care.

    An aging population, growing technology and rising standards of care are continuing to trump all present and anticipated efforts to contain rising costs. Absent a financial cataclysm dwarfing the Great Recession, or a hot war in the Middle East (neither of which is likely, nor impossible) there will not be a sufficient level of national/political will to reduce the pace of health care cost inflation. It is unlikely that anyone reading this today will see the percentile cost of health care in the United States fall into line with the cost of care in the rest of the industrial world.

    Seen from the nation’s perspective, the leveraged rise in health care spending — at a much faster pace than the GDP — is deeply problematic. Health care entitlement costs shift dollars from other social and national demands, setting into motion a rising conflict for resources that can only be resolved with rising taxes, rising national debt or rationed care. Personal health care costs siphon dollars from other productive sectors and are the leading cause of personal bankruptcy.

    Seen from a provider’s perspective (whether a practice, a hospital or the medical products industry), the leveraged rise in health care spending is the continuation of good news. Health care as a career is one of the most intellectually and economically vibrant of the professions. Most of us in this sector sailed through the Great Recession while our friends in finance, housing, retail and other sectors had to retrench.

    • John B. Pinto
    • OSN Practice Management Section Editor

    Disclosures: Pinto reports he is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm.