National Health Expenditures Projected to Grow Steadily Over Next Decade

On July 13, 2016 the CMS Office of the Actuary (OACT) released its 2015-2025 projections of national health expenditures data. According to the report, total health care spending is expected grow at an average annual rate 5.8 percent over the next decade (2015-2025). Total national health spending is estimated to have increased by 5.5 percent in 2015 and is believed to have reached a total of $3.2 trillion in 2015.

Of significant interest, the data projects that health care spending is projected to grow 1.3 percentage points faster than GDP per year over this same time period (2015-2025). This means that the share of health spending in America’s GDP is expected to rise from 17.5 percent in 2014 to 20.1 percent by 2025. While the above projections may raise initial red flags, a number of figures in the report are cause for optimism, including:

  • Projected national health spending growth is lower than the average rate of growth over the two decades prior to 2008;
  • In 2016 growth in health spending is projected to lessen by 0.7 percent as the enrollment in Medicaid and ACA marketplace plans slows;
  • The share of health expenses paid out-of-pocket is projected to decline form 10.9 percent in 2014 to 9.9 percent in 2025;
  • Insured share of the population is expected to rise from 89 percent in 2014 to 92 percent by 2025 (this would lower the number of uninsured to a projected 28.4 million individuals).

The projections include estimates on the Medicare and Medicaid programs. Medicaid is expected to spend an average of nearly $12,500 a year per beneficiary in 2025, up from about $8,000 per beneficiary in 2015.

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By 2025 it is projected that one out of every five Americans will be on Medicare, and the program will be spending an additional $6,000 per year per beneficiary in 2025 over the $12,000 per beneficiary spent in 2015. For comparison, private insurers are expected to spend roughly $8,600 per beneficiary in 2025, compared to the $5,400 they spent per beneficiary in 2015.

From 2020 to 2025, Medicare is expected to grow faster than all other comparable payers as its spending expands at a rate of 7.6 percent; of note is the rising age of the baby-boomer generation which will dramatically expand the number of Medicare eligible individuals.

The report states that the primary drivers of national health spending and coverage trends over the next decade will be:

  • the initial effects of the Affordable Care Act (ACA) on health care spending and insurance coverage;
  • increases in economic growth;
  • faster growth in medical prices, and
  • population aging.

Federal, state, and local governments are projected to finance 47 percent of national health spending in 2025, up from 45 percent in 2014.

CMS Acting Administrator Andy Slavitt stated his belief that provisions of the Affordable Care Act have been helping keep health spending growth at modest levels, while enabling more Americans to have access to coverage. He continued proclaiming, “Per-capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems.” In 2015, Congress passed the Medicare Access and CHIP Reauthorization Act which is set to significantly reform the Medicare payment system.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA 
President/CEO