Latest National Health Spending Projections

By August 2, 2011Commentary

The CMS Office of the Actuary has released its most recent projections of national health spending through 2010, showing trends in service sectors, by payer type and with the effect of the reform act.   (HA Article) The Office estimates that spending was $2.6 trillion in 2010, increasing by 3.9% over 2009 and accounting for 17.6% of GDP.  The rate of growth was relatively slow due to reductions in Medicare payments and the loss of private insurance as unemployment rose.  On a per capita basis, $8,327 was spent on each citizen, which is projected to rise to $8,648 in 2011 and eventually to $13,709 by 2020.  2011 NHE are projected at $2.7 trillion, increasing to $3.2 trillion in 2014 and $4.6 trillion in 2020.  By 2020 NHE will be almost 20% of GDP, as spending continues to rise more rapidly than general economic growth, whether measured on an aggregate or per capita basis.

In 2011 and 2013 health spending is projected to grow faster as the economy recovers and there are modest effects from the reform act’s provisions that will have been implemented by and in that time period.   The year 2014 will see the most dramatic changes as the enrollment provisions and mandates kick in.  The newly insured persons will have a greater effect on physician and drug spending, as they will likely be relatively healthier and because newly insured people often use more services.   Overall, spending is projected to rise 8.3% in 2014, the most rapid increase of the ten year period looked at in the report.   Out-of-pocket spending’s growth rate should decline as the reforms are implemented.  The reform law kicks up the rate of growth by almost three percentage points over what it would have been in the absence of the law.

After the law’s full implementation in 2014, spending growth averages over 6% a year out to 2020.  Even the Administration and those in Congress responsible for passing the reform act no longer try to claim that it will reduce spending.  It is quite apparent that it has increased costs and spending.  By 2020 hospital spending will be 30% of the total, physician costs 19% and drugs 11%.  Medicare and Medicaid spending will continue to rise dramatically over the projection period, particularly with the Medicaid expansion in 2014, culminating in government spending accounting for over half the total in 2020.  Not a pretty picture for either the economy, our national finances or for the people living in this country.  And an even less pretty picture if you believe that Medicare provider payments are not going to be able to reduced as required in the current law.

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