Under current law, not assuming potential legislative changes during the projection period, CMS estimated an average annual increase in national health expenditures from 2016 to 2025 of 5.6%, driven by faster economic and price growth, according to data published in Health Affairs.
These projections in national health spending outpace the average expected growth in the gross domestic product by 1.2 percentage points. The health share of the economy is therefore expected to reach 19.9% by 2025, an increase from 17.8% in 2015, while medical prices are expected to reach nearly 3% by 2025, up from 0.8% in 2015, a recent historic low. CMS expects slowed growth in the use and intensity of medical goods and services will partially counterbalance the faster projected growth. In addition, changes in the age and sex distribution of the population are estimated to contribute an average of 0.5 percentage points to growth each year.
“After an anticipated slowdown in health spending growth for 2016, we expect health spending growth to gradually increase as a result of faster projected growth in medical prices that is only partially offset by slower projected growth in the use and intensity of medical goods and services,” Sean P. Keehan, lead researcher from the office of the actuary at CMS, said in a press release. “Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services.”
As a result of slow growth in Medicaid and private health insurance spending and low growth in Medicare spending, the slowest health expenditure growth rates are expected to occur during the first 2 years of the projection period, with total health spending increasing to 4.8% in 2016 — reaching nearly $3.4 trillion — and 5.4% in 2017. Previous data from CMS found that U.S. health spending reached $3.2 trillion in 2015. From 2018 to 2025, expenditures for Medicare and Medicaid are projected to grow faster than private health insurance spending and faster than the Medicare and Medicaid expenditures for the 2016 to 2017 period, resulting in an average national health spending rate of 5.8%. Forty-seven percent of national health expenditures — increasing slightly from 46% in 2015 — are estimated to be financed by federal, state and local governments by 2025, according to the report.
Due to greater spending on expensive specialty drugs, prescription drug spending is projected to increase an average of 6.4% per year from 2017 to 2025. CMS also estimated that, based on current law, in 2025 91.5% of the population will have health insurance, increasing from 90.9% in 2015. – by Alaina Tedesco
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Disclosure: The researchers report no relevant financial disclosures.