CMS Office of the Actuary projects modest growth in healthcare spending
Consistent with past years’ findings, a report from the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary projects U.S. healthcare spending growth over the next 10 years will be modest in comparison to historical trends, with increased spending the result of an improving economy and more accessible and affordable health coverage.
Low rates of health spending growth are anticipated to continue through 2013 in key areas, such as hospital and drug spending.
The National Health Expenditure projections report, issued annually, contains estimates of spending for healthcare in the U.S. over the next decade by type of service and source of funding.
The report projected health spending growth would rise in coming years from historically low levels, due to more available and affordable care and an influx of baby boomers into the Medicare program with a greater need for healthcare as they age. The Actuary’s office also projected rates of healthcare spending over the next decade in several major categories would be below their peak rates in the previous decade, including hospital and prescription drug spending, out-of-pocket spending and Medicare spending.
“We are on the right track to controlling healthcare costs, thanks in part to the Affordable Care Act,” said Marilyn Tavenner, CMS administrator. “We have identified several areas where our reforms to control costs are making progress, and we must build on those efforts in the years ahead.”
The report finds Medicare spending growth has slowed. Medicare spending growth is estimated to have slowed to 4.6% in 2012, down from 6.2% in 2011 for a total of $579.9 billion. While increases in the number of Medicare enrollees, utilization and input prices will lead to an annual increase of 7.4% between 2015 and 2022, according to the report, well below the previous decade’s 9.3% rate of growth, as the Affordable Care Act constrains fee-for-service and private plan payment growth.
Out-of-pocket spending will be lower as people have more affordable coverage. By 2022, the share of total health spending attributable to out-of-pocket spending is projected to fall from 11.4% in 2012 to 9.1%, largely as a result of expanded insurance coverage.
For the third consecutive year, spending increases on hospital services are projected to be below 5%. For 2015 to 2022, growth in total hospital spending is projected to average 6.3% per year. Over this period, hospital spending will be affected by a number of factors, including increases in spending among the newly covered, improvements in the economy expected to lead to more use of services, aging of the U.S. population and Medicare hospital payment update reductions that have been cumulatively affecting spending since 2012.
In 2012, prescription drug spending is estimated to have declined 0.8%, down from 2.9% growth in 2011, as several popular brand-name drugs lost patent protection. From 2015 to 2022, projected annual average growth in prescription drug spending will be 6.5%, as increases in insurance coverage and disposable income enable more consumers to fill prescriptions. This rate is below the average annual growth of 8.6% between 2000 and 2009.
Physician and clinical services spending has remained low compared to previous years. Spending on physician and clinical services is estimated to have grown 4.6% in 2012, compared to 4.3% in 2011. The Actuary’s office projects physician and clinical services spending will rise to 7.1% in 2014, when more Americans will have health insurance and utilize physician services. These projections do not take into account Medicare physician payment cuts under the Sustainable Growth Rate formula, which—if not overridden by Congress—would restrain growth in spending for physicians’ services to 4.7%.
Medicaid spending per person will fall in 2014. According to the report, per enrollee Medicaid spending is expected to decline by 2.8% in 2014, due to the entry of non-disabled children and younger and nondisabled adults into the Medicaid program. The program will cover nearly nine million newly insured Americans, leading to a rise in Medicaid spending of 12.2% in 2014.