US Healthcare Spending Projected to Climb Swiftly

The study, by the Centers for Medicare and Medicaid Services, projects that the average growth in health spending will be even faster between 2016 and 2025, at 5.6 percent per year, driven by inflation in the cost of medical services and products and an aging population.

The growth in national health spending is expected to be driven by projected increases in medical prices from a recent historic low of 0.8 percent in 2015, to almost 3.0 percent by 2025.

However, the new CMS report says that increased competition among drug manufacturers could help to slow the rate of spending on prescription drugs, especially as patents expire on many name brand drugs and generic drug manufactures offer cheaper substitutes. Last year, the growth in health care costs slowed 1.1 percentage points to 4.8 percent, thanks in part to a lull in the growth of Medicaid and prescription drug spending.

In the next decade, healthcare spending growth in the US could outstrip growth of the nation's gross domestic product, according to a new analysis.

The insured percentage of the population is now projected to increase from 90.9 percent in 2015 to 91.5 percent by 2025, assuming no change in current law. The report also found that by 2025, federal, state and local governments are projected to finance 47% of national health spending, a slight increase from 46% in 2015. Actuaries project 207.1 million would have private insurance by 2025, up about 4 percent from 2016 levels.

"Growth in medical prices-especially for 2016, 2017, and 2018 were a little bit slower in this year's report than they were in last year's report", said Sean Keehan, an economist in the CMS Office of the Actuary, and the report's lead author.

Medicare spending growth is projected to have been 5% in 2016 and is expected to average 7.1% over the full projection period 2016-2025. Growth in national health expenditures over this period is largely influenced by projected faster growth in medical prices compared to recent historically low growth. That's down from 5.8 percent growth in 2015.

The role of the Affordable Care Act in contributing to that slower growth is disputed.

Researchers argue the average rate of medical prices, which reached a "historic low" in 2015 at 0.8%, will drive the spending growth as it will increase at a faster pace and reach 3.0% by 2025.

Medical prices are expected to increase more rapidly after historically low growth in 2015 of 0.8% to almost 3% by 2025. The report noted that drug spending growth is anticipated to have been 5% in 2016, following growth of 9% in 2015, primarily due to slowing use of costly hepatitis C drugs.

The proportion of the population with health insurance is projected to increase from 90.9% in 2015 to 91.5% in 2025.



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