National Health Expenditures in the Coming Decade

By March 25, 2020 Commentary

The Office of the Actuary at CMS is responsible for tracking national health spending and projecting it forward.  It issues an annual update, which typically is first published in Health Affairs.  (HA Article)   The current projection is that national expenditures will rise about 5.4% annually from 2019 to 2028 and will be about 19.7% of GDP or $6.2 trillion at the end of that time.  Obviously this work was done before coronavirus hit and no one yet knows what the impact of that may be.  Much of the increase is due to faster expected price growth, averaging 2.4% per year.  By contrast from 2016 to 2018, health spending rose an average of 4.5% and prices rose 1.3% per year.  GDP growth is projected to average 4.3%, also obviously out the window in light of coronavirus.  Much of the increase in prices is due to expectations that wages in the health care sector will rise more rapidly.  Medicare is projected to have 7.6% average annual spending growth over this time, due in part to the number of beneficiaries increasing by 2.5% per year.  Medicaid is anticipated to have 1.1% average annual enrollment growth and 4.5% spending growth, while for private insurance annual enrollment growth averages .3% and spending growth of 5%.  Per enrollee spending will obviously be somewhat slower as population growth and aging adds to enrollment.  The federal and state government will be responsible for 47% of all health spending at the end of the period.  Household spending, or out-of-pocket health costs, is expected to be steady at 28% of all funding.  Almost every category of health spending is expected to see a slight acceleration in annual growth rates over the period, contributing to the overall rise.  Hospital care will remain the single largest source of expenditure, followed by professional services and prescription drugs.

In light of the imminent exhaustion of the Medicare hospital insurance fund, it would seem imperative for Congress to begin now addressing how Medicare, which will cover 20% of the population by 2028, will remain solvent.  And it is apparent that the continued rise in health spending will be a major source of financial burden to working, low and middle-income families.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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  • Jason says:

    Medicare was insolvent from the day it was first implemented. I know the fiction of the trust fund but that only covers hospitalizations (Part A). Premiums have never covered 100% of Part B which is almost exactly the same size as Part A (~200BB). Throw in the share of Part C that is really just a proxy for B and you get an even bigger gap.

    And I haven’t addressed the fiction that there is a trust fund to begin with. It’s just filled with restricted treasury notes that can only be redeemed by future taxes. There is no real underlying asset there, just deferred debt.

    I know that wasn’t your main point but the whole notion that things were fine and that trust funds exist in any real sense is a big part of the whole entitlement problem to begin with.

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