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National Health Spending Projections

By June 14, 2012Commentary

Per capita national health spending growth has slowed since 2007, largely due to the recession, which has dampened utilization and price increases, although spending growth remained slightly above GDP growth.  The latest Office of the Actuary ten-year spending projections are out and published in Health Affairs.  (Health Affairs Article)  At the top line, spending was estimated to be $2.695 trillion in 2011 and to be $2.809 trillion in 2012, growing to $4.781 trillion in 2021.  In per capita terms, that was $8,660 in 2011; $8,953 in 2012 and will be $14,103 in 2021.  The top line growth rate was about 3.9% in 2011, 4.2% in 2012 and is projected to accelerate to 7.4% in 2014 and 6.2% in 2021.  The per capita growth rate was also about 3.9% in 2011, 4.0% in 2012 and will be 5.1% in 2014 and 2021.  Even though much more rapid economic growth than we have experienced recently is projected for most of the ten-year forecast period (a projection which seems dubious at this point), health spending is still growing faster and will increase from 17.9% of GDP today to 19.6% in 2021.

Following full implementation of the reform act, almost all categories of service will grow rapidly, but interestingly, government administration cost is the fastest growing expense, at almost 12% a year.  Can you say bureaucratic waste?  While the projections reflect the supposed cuts in Medicare reimbursement that are scheduled to occur, the paper again notes that in an alternative, probably much more realistic scenario, Congress does not allow those cuts to fully occur and spending rises more rapidly, probably not just for Medicare, but for the private payers who increasingly base their reimbursement on Medicare as well.  Medicaid spending is projected to be the most rapidly growing payer category after 2014, large because of the significant eligibility expansion.  Overall, governments will account for 50% or more of all health spending.  The basic message is that the heavy pressure being put on government budgets by health costs will not be letting up and new solutions are still needed to address that problem.

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