Spending on health care is projected to rise at a faster-than-average rate throughout the next decade, according to the Office of the Actuary at the Centers for Medicare & Medicaid Services.
“Overall, national health spending is projected to grow at 5.5% per year, on average, for 2018-27,” wrote Andrea Sisko, economist in the Office of the Actuary, and colleagues (Health Aff. 2019 Feb 20.). “This is faster than the average growth rate experienced following the last recession (3.9% for 2008-2013) and the more recent period inclusive of the Affordable Care Act’s major coverage expansions (5.3% for 2014-16).”
Medicare is projected to see the fastest growth in spending at 7.4% per year “as the shift of the Baby Boom generation into the program continues to result in robust growth in enrollment,” according to the authors.
Private payers should see a corollary slower growth in spending (4.8% per year) over the same period, while Medicaid spending is projected at 5.5% per year.
Faster growth in Medicare spending is expected to come from higher spending on prescription drugs and hospital services, as well as higher fee-for-service payment updates.
Spending increases are projected to be mitigated somewhat by the end of the ACA penalty for not having insurance – which is projected to add 1.3 million people this year to the ranks of the uninsured, according to the report.
Half of the overall growth in health care spending is attributable to rising prices in personal health care prices, on average, Ms. Sisko and colleagues wrote. “Growth in use and intensity is expected to account for just under one-third of the average annual personal health care spending growth, with population growth and the changing age-sex mix of the population accounting for the remainder.”
For those with private insurance, out-of-pocket spending is projected to accelerate to a 3.6% growth rate in 2018 from 2.6% in 2017 “a rate that is consistent with faster income growth as well as with the higher average deductibles for employer-based private health insurance enrollees in 2018 compared to 2017,” the authors note.
“Growth in out-of-pocket spending, which is also primarily influenced by economic factors, is expected to be similar to that of private health insurance spending in 2020-27, at 5%,” they add.
Prescription drug spending also is expected to grow.
“Following growth of just 0.4% in 2017, prescription drug spending is expected to have grown 3.3% in 2018 but still be among the slowest-growing health care sectors,” according to the authors. “Higher utilization growth is anticipated, compared to the relatively low growth in 2016 and 2017, partially driven by an increase in the number of new drug introductions.”
Growth in prescription drug spending is expected to accelerate further to 4.6% in 2019, based on growth in utilization and a “modest increase in drug price growth.”
Starting in 2020, that growth rate is projected to increase, on average, by 6.1% per year, based on the expectation that employers and insurers will lower barriers to maintenance medications for chronic conditions.
In 2019, growth in spending for physician clinical services is projected to accelerate to 5.4% from 4.9% in 2018.
“An acceleration in Medicaid spending growth is the primary factor contributing to the trend, which is in part associated with program’s expansion by additional states,” the authors note.
From 2020 to 2027, growth in spending on physician and clinical services is expected to average 5.4% per year, driven in part by price growth for these services.
“Underlying this acceleration are projected rising costs related to the provision of care,” the report said. “In particular, wages are expected to increase as a result of the supply of physicians not being able to meet expected increases in demand for care connected with the aging population. Furthermore, some of the productivity gains that have been achieved through the use of lower-cost providers as a substitute for physician care within physician practices may be less pronounced in the future, because of limitations such as licensing restrictions on the scope of care that may be provided by nonphysician providers.”
SOURCE: Sisko A et al. Health Aff. 2019 Feb 20. .