CMS Foresees 5.8% Increase in Annual Health Care Spending

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Total U.S. health care spending will increase at an annual average rate of 5.8% to nearly $4.64 trillion for the period 2010 through 2020--1.1% faster than expected growth in the gross domestic product (GDP).

This is among the findings of a report released by the Centers for Medicare and Medicaid Services (CMS) and published online in the July issue of Health Affairs. The report further stipulates that by 2020, health care spending is projected to comprise 19.8% of the GDP, up from 17.6% last year.

According to Sean Keehan, lead author of the study, the Accountable Care Act (ACA) will have only a minor effect on the overall growth rate in the next decade. “Without including the impact of the ACA, the growth rate would be 5.7%, and the ACA only adds 0.1 percent to growth,” Keehan asserts. However, CMS analysts foresee a spike in the growth rate in 2014, as ACA mandates lead to the expansion of private and public health offerings. In fact, Keehan says, an 8.3% growth rate is projected for 2014, the year the ACA goes into effect, attributable primarily to patients seeking physician services and prescription medication for the first time. This is compared to a projected growth rate of 5.5% in 2013.

"In 2014, spending on prescription drugs and physician and clinical services will grow quicker than spending on hospital services, reflecting the needs of newly insured Americans, who are expected to be younger and healthier on average than currently insured Americans," the report's authors also write.

Medicare reimbursement cuts will be a catalyst for\slowing growth rates, the authors say.“The adjustments of Medicare payments to most categories of providers clearly slows down the growth rate for Medicare,” they assert. “However, we have noted that in the long range, it might be difficult to sustain that kind of payment schedule.”

Among other findings highlighted in the report, spending on physician and clinical services is expected to comprise a 19% share of national health spending in 2014, unchanged from 2013 prior to the enactment of the ACA. However, hospital spending growth for 2014 is anticipated to accelerate to 7.2% in 2014, one percentage point and $8.6 billion higher as a result of the ACA. Moreover, Medicaid spending—driven by expanded Medicaid eligibility criteria mandated by the ACA, is projected to trend sharply upward in 2014 (20.3%); by 2020, Medicaid is projected to account for nearly 20% of national health spending, up from 15% in 2009.

Additionally, the rate of Medicare spending growth is estimated to drop, from 7.9% in 2009 to 4.5% in 2010, and to slow further through 2013 as a consequence of the 29.4% physician payment rate reduction scheduled for January 1, 2012. CMS expects Medicare's 20% share of national health spending to remain the same in 2020 as it was in 2010.

To read the report, click here: http://content.healthaffairs.org/content/early/2011/07/27/hlthaff.2011.0...