Medicare, Medicaid to drive health spending in next 9 years

Over the next eight years, healthcare spending could become an even bigger part of the national spending pie, according to an annual report from the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary published in Health Affairs.

The average national expenditure growth for health services is expected to rise to 5.6 percent during the 2016-2025 period, driven primarily by rising medical prices following a historic spending low in 2015. The projected growth rate exceeds the projected growth in Gross Domestic Product by 1.2 percent, which will increase the portion of U.S. national spending dedicated to healthcare from 17.8 percent to nearly 20 percent.

For 2016-17, analysts expect health spending to be at its lowest in the nine-year period. Medicaid spending growth has dropped from 9.7 percent in 2015 to just 3.7 percent in 2016. Prescription drug spending dropped to 5.0 percent in 2016, after recording a crushing high of 9.0 percent the year before. In 2017, private health insurance spending growth is expected to accelerate by half a percentage point, in large part because of premium adjustments within the health insurance Marketplace and the elimination of risk corridor payments.

From 2018-2025, spending is expected to pick up speed based on faster growth in Medicare and Medicaid expenditures, which could have a growth rate of 7.6 percent by 2020.

“By 2025, 47 percent of health spending is projected to be sponsored by federal, state, and local governments, up from 46 percent in 2015. This expected higher share of spending by governments reflects, in part, the continued transition of the baby-boomer generation into Medicare,” the report states. The report is based on current healthcare law, which includes the Affordable Care Act and state Medicaid expansions.

Every year the CMS Office of the Actuary releases an analysis of how Americans are expected to spend their healthcare dollars in the years ahead. The projected average growth rate for 2016-2025 reflects the latest expectations from the Office of the Actuary and updates its 2016 report, published last year in Health Affairs.

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