10 things to know about the new healthcare spending projections

CMS' Office of the Actuary Tuesday announced health spending in 2014 totaled $3.1 trillion. Here are 10 things to know about the report and how experts are reacting to the latest numbers and forecasts about health expenditures.

1. Healthcare spending grew 5.5 percent in 2014. That's the first time growth exceeded 5 percent since 2007.

2. CMS actuaries said growth in healthcare spending will increase at a faster pace than the economy for the next 10 years. The share of the economy that goes toward healthcare will increase from 17.4 percent in 2013 to 19.6 percent in 2024.

3. Yesterday's numbers represent a change from the past five years. The increase in healthcare spending dipped dramatically during the economic recession in 2007 through 2009. Then, for the following several years, spending growth was relatively aligned with the recovering economy. The average annual growth rate was 4 percent in the period 2008 to 2013.

4. The increase in spending growth last year is driven by three forces, according to Medicare forecasters: expanded insurance coverage under the Affordable Care Act, the aging American population and a recovering economy.

5. Another factor that contributed to faster projected health spending growth in 2014: A rise in prescription drug spending growth, which is projected to have accelerated from 2.5 percent in 2013 to 12.6 percent in 2014.

6. Health economists have debated whether the healthcare spending slowdown was cyclical, related to the Great Recession, or structural, related to policy changes and a less wasteful healthcare system. Now experts are turning an eye to see if spending growth will exceed pre-recession levels, or remain there or slightly lower.

7. These spending projections can be seen as positive or negative, depending on the point of view. Economist Douglas Holtz-Eakin, PhD, president of center-right think tank American Action Forum, told The Washington Post he was not optimistic. "The main point is that the bill will continue to grow faster than the economy, which is what pays the bill," Dr. Holtz-Eakin told The Washington Post. "The next president faces the task of reining in the growth of federal entitlement spending."

8. Other economists like Charles Roehrig, PhD, a vice president at health research group Altarum Institute, see the glass half full. Dr. Roehrig told The New York Times projected spending may have been overstated. "I think that if we get back onto the path we were on before the recession, which was a steadily declining excess growth rate, that we ought to be able to get below" the estimate, he said in the report.

9. The report also projected 78.1 million Medicaid enrollees and 70.3 million Medicare enrollees by 2024, according to The Wall Street Journal. The increase in Medicare enrollees in particular could trigger increased costs and action from the Independent Payment Advisory Board, WSJ speculates. This panel is meant to make spending cuts if Medicare exceeds certain cost growth, which the actuaries say could happen as soon as 2017, according to WSJ.

10. The accuracy of these projections, while improved in recent years, tends to be less accurate the farther into the future a projection speculates, according to Tom Getzen, PhD, executive director of the International Health Economics Association, who published an analysis of expenditure projections. In his analysis, Dr. Getzen says the numbers to put the most stock in are those that show projections of growth as a portion of GDP, rather than those that show spending as a dollar figure over a period of time.

 

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