Press Release


For Immediate Release Contact

 

Sue Ducat
Director of Communications
(301) 841-9962
sducat@projecthope.org

   

Projected Slow Growth in 2013 Health Spending Ahead of Future Increases

 
Insurance Coverage, Population Aging, and Economic Growth Are Main Drivers of Projected Future Health Spending Increases
 

Bethesda, MD

New estimates released today from the Office of the Actuary at the Centers for Medicare and Medicaid Services project a slow 3.6 percent rate of health spending growth for 2013 but also project a 5.6 percent increase in health spending for 2014 and an average 6.0 percent increase for 2015-23. The average rate of projected growth for 2013-23 is 5.7 percent, exceeding the expected average growth in gross domestic product (GDP) by 1.1 percentage points. Increased insurance coverage via the Affordable Care Act (ACA), projected economic growth, and population aging will be the main contributors of this growth, ultimately leading to an expected 19.3 percent health share of nominal GDP in 2023, up from 17.2 percent in 2012. This compares to the Office of the Actuary's 2013 report, previously published in Health Affairs, predicting an average growth rate of 5.8 percent for 2012-22.
 
Every year, the Office of the Actuary releases an analysis of how Americans are likely to spend their health care dollars in the coming decade. The new findings appear as a Health Affairs Web First article and will also appear in the journal's October issue.  The study link: http://content.healthaffairs.org/lookup/doi/10.1377/hlthaff.2014.0560
 
Despite the health insurance coverage expansions, the authors found that the average projected increase in health care spending over the next decade will still be slower than 1990-2008 when the average rate was 7.2 percent and health spending grew 2.0 percentage points faster than GDP.  
 
"Analysis of historical trends tells us that health care spending tracks with economic growth, so as the economy is anticipated to improve over the next decade, health spending growth is projected to grow faster," says Andrea Sisko, the lead author for the study. "This, in addition to the baby boomers aging and increased insurance coverage mandated by ACA, is expected to result in the health share of GDP rising to nearly one-fifth of the nation's economy by 2023." 
 
Projections for the 2013-23 time period take into account a combination of factors affecting health care spending, including national economic forecasts and demographic trends. The authors noted that the estimates in this report do not presume that the scheduled Medicare physician payment rates under the Sustainable Growth Rate formula, including the approximately 21 percent cut scheduled for April 1, 2015, are undertaken. These projections are estimated in a manner consistent with the projected baseline scenario in the 2014 Medicare Trustees Report.
 
2013
  • Health spending growth in 2013 is anticipated to have increased by 3.6 percent.

  • Contributing to this fifth projected year of historically low growth rates were a modest economic recovery, the effect of sequestration on Medicare expenditure growth, and continued slow growth in the use of Medicare services, resulting in that program's spending growth decelerating from 4.8 percent to 3.3 percent. 

  • Another factor contributing to projected slower growth is increased cost-sharing requirements and increasing adoption of private high-deductible health insurance plans.  

  • Countering these trends was growth in Medicaid expenditures (projected to be 6.7 percent in 2013, compared to 3.3 percent in 2012) due to a temporary primary care physician payment increase mandated by the ACA, as well as increases in provider reimbursement rates and expanded benefits implemented by the states.

2014
  • Projected health spending growth in 2014 is 5.6 percent, a rate closer to the estimated average rate for the time period studied.  

  • The 2014 projected growth rate is influenced by an expected decrease in uninsured Americans due to Medicaid and Marketplace private health insurance opportunities, and more generous private coverage options for those previously insured. 

  • As a result of the coverage expansions, Medicaid spending is expected to increase 12.8 percent and private insurance spending is expected to increase by 6.8 percent.

 

2015
  • Despite continued enrollment through the coverage expansions, health spending growth in 2015 is projected at 4.9 percent, slower than the rate of increase projected for 2014. 

  • The 2015 overall projected rate is influenced by planned payment reductions in Medicare Advantage plans. As a result, Medicare expenditure growth is projected to slow by 1.5 percentage points in 2015 to 2.7 percent.

  • Medicaid spending growth is projected to decelerate to 6.7 percent in 2015, as increased Medicaid provider payments to primary care physicians are scheduled to expire. 

 

2016-23
  • Health spending growth for 2016-23 is projected to increase 6.1 percent per year.

  • Projected increases in growth for disposable personal income are expected to increase demand for health services and goods, as well as lead to increasing insurance coverage and private health insurance spending.  
  • Medicare expenditure growth is expected to peak at 7.9 percent in 2020 due to continued enrollment by the baby boomers and faster per beneficiary spending growth as they age.  

  • Private health insurance premium growth is projected to be 5.4 percent per year for 2016-23, faster than the 3.2 percent annual growth for 2009-13.

  • While these conditions in sum lead to a faster projected rate of health spending growth, higher cost-sharing requirements for the privately insured and slower growth for Medicare payment rates as mandated by the ACA are expected to counter this trend.  
 
About Health Affairs
 

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically at www.healthaffairs.org. The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a one-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.