Spending for federal health programs is expected to remain ‘modest’ over the next 10 years

July 29, 2015
Area(s) of Interest: Access to Care 

Total health care spending growth for federal health programs such as Medicare and Medicaid is expected to average 5.8 percent in aggregate over 2014-2024, according to a report published by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary. The authors noted that this rate of growth is still substantially lower than the 9 percent average rate seen in the three decades before 2008.  

“Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels,” said CMS Acting Administrator Andy Slavitt.

In 2014, health spending in the United States was projected to have reached $3.1 trillion, or $9,695 per person, and to have increased by 5.5 percent from the previous year.

With new expensive specialty drugs hitting the market, prescription drug spending increased 12.6 percent in 2014, the highest growth since 2002. While more people are getting coverage, annual growth in per-enrollee expenditures in 2014 for private health insurance (5.4 percent), Medicare (2.7 percent) and Medicaid (-0.8 percent) remained slow in historical terms.

Other findings from the report included:

  • Medical price inflation averaged 1.4 percent nationally – even with the implementation of the Affordable Care Act (ACA). Hospital and physician and clinical services, which make up the largest portions of medical prices, also increased slowly at 1.4 and 0.5 percent, respectively.
  • Premium growth in private health plans is projected to slow to 2.8 percent in 2015, reflecting the expectation of somewhat healthier marketplace enrollees and the increasing prevalence of high-deductible health plans offered by employers. The authors projected that per-capita premium growth would remain below 6 percent through the end of the projection period (2024).
  • Approximately 19.1 million additional people are expected to enroll in Medicare over the next 11 years as more members of the Baby Boomer generation reach the Medicare eligibility age.
  • In 2014, per capita Medicaid spending was projected to have decreased by 0.8 percent as the newly enrolled were expected to be somewhat healthier than those who were enrolled previously. Overall spending, however, is projected to have increased by 12 percent in 2014 as a result of a 12.9-percent increase in enrollment related to the ACA coverage expansion.
  • While the newly enrolled Medicaid adult population is projected to cost more than adults who were enrolled in the program in 2013, the authors expect that per-enrollee costs will fall below the costs of other adults after pent-up demand for medical care is satisfied.
  • The insured rate is expected to rise from 86 percent to 92.4 percent as the number of uninsured persons is projected to fall by 18 million over the next 11 years.
  • With increases in coverage, the share of health expenses that Americans pay out-of-pocket is projected to decline from 11.6 percent in 2013 to 10 percent in 2024.

Click here to read the report. Read the article published in Health Affairs here.


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