The report, published in the health policy journal Health Affairs, predicts that health care spending growth is accelerating after several years of unusually low growth, propelled by an improving economy, higher medical prices and the aging of the baby boom generation.
According to “National Health Expenditure Projections 2015–25: Economy, Prices and Aging Expected to Shape Spending and Enrollment,” health care spending growth between 2015 and 2025 is figured to average 5.8%, 1.3 percentage points faster than the economy, as measured by gross domestic product. By 2025, health care spending is expected to represent 20% of the total economy, up from 17.5% in 2014.
By 2025, one out of five Americans will be enrolled in Medicare, which will be spending nearly $18,000 a year for each enrollee. In 2015, Medicare spending was approximately $12,000 per beneficiary.
In addition, spending by Medicaid, which is geared mainly to lower-income patients, is expected to total almost $12,500 per enrollee, compared with about $8,000 in 2015. Spending by private insurers is forecast to increase to an average of about $8,600 per beneficiary, up from $5,400 in 2015.
Government’s share of health care spending is projected to rise to 47% of health care expenditures in 2025, up from 45% in 2014. The percentage of the population that is uninsured, however, is expected to decrease to 8% from 11% in the same period.
To put the spending increases in perspective, health care spending growth has slowed significantly in recent years compared with the early 1990s. The 6% rate of growth predicted for the period 2020 to 2025 will still be well below the average annual growth of nearly 8% between 1987 and 2007, before the Great Recession.
A study by the Congressional Budget Office in 1993 projected that health care spending would claim 20% of the economy by 2003, which the present study now predicts will not happen until 2025.
Sean Keehan, lead author and an economist in the actuary’s office of CMS, told The New York Times that the expected rise in health care spending growth will be a response to projected improvements in the economy in the coming decade. In addition, more-rapid growth in drug prices and the use of more-expensive specialty drugs are expected to drive spending growth.
The report points out, however, that the impact on spending of newly approved drugs in 2015 is expected to be less than in the previous two years. In 2015, 45 new drugs were approved, but many have small target patient populations.
In 2014, 41 drugs were approved, up from 27 in 2013. Several of those drugs, though, were developed for widespread use. Consequently, the impact on spending growth from new drugs over the period 2015 to 2025 is expected to be lower than it was in 2014 and 2015.