CMS projects next decade of health expenditures, enrollment: 5 things to know

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National health spending is expected to grow at an average annual rate of 5.8 percent over the next decade so that by 2025, healthcare will comprise more than a fifth of the economy, according to new estimates from CMS' Office of the Actuary published Wednesday in Health Affairs.

"Following the initial effects of the Affordable Care Act on healthcare spending and insurance coverage, increases in economic growth, faster growth in medical prices and population aging are expected to be the primary drivers of national health spending and coverage trends over the next decade," Sean Keehan, the study's first author and an economist in the CMS Office of the Actuary, said in a statement.

Here are five takeaways from the CMS report.

1. Last year marked an uptick in national health spending growth, partially attributable to increases in health insurance enrollment. CMS estimates national health spending grew 5.5 percent in 2015, reaching $3.2 trillion. This growth marks an increase compared to 5.3 percent growth in 2014. CMS attributes this increase to the newly insured seeking healthcare services, especially since growth slowed in 2015 for medical prices, hospital prices and physician prices.

2. The pace of health insurance enrollment is expected to slow. CMS estimates the 2015 uninsured population declined by 7.2 million, and it projects the uninsured population will drop by an additional 1.6 million in 2016 as more Americans gain insurance. CMS expects the uninsured rate to fall to 8 percent of the population by 2025.     

3. By the end of the next decade, the burden of health spending will shift slightly more into hands of federal, state and local governments. As the full impacts of increased health insurance coverage under the ACA settle in, and more of the population becomes eligible for Medicare, CMS expects governments to take on an additional 3 percentage points of health spending responsibility. This means governments would pay for 47 percent of health spending by 2025, relieving businesses and households of some out-of-pocket costs by the end of the decade.

4. While Medicare spending will continue to accelerate, aggregate national health spending and Medicaid spending are slowing down. National health spending per capita exceeded the $10,000mark this year, but overall growth is expected to slow to 4.8 percent in 2016, primarily due to slowed Medicaid spending. Medicaid spending growth is projected to slow to 5.3 percent, down more than half from an average growth of 10.8 percent in 2014 and 2015. Medicare spending hit $647.3 billion in 2015 and is on the rise in 2016 due to more inpatient service use, but per-enrollee cost growth has remained steady. Medicare is expected to outpace other major payers by 2025 as more baby boomers transition into the program.

5. This year CMS also expects prescription drug spending growth to slow. It anticipates prescription drug spending growth will drop to 6.3 percent this year, from 8.1 percent in 2015 due to a decline in spending on newly approved drugs, such as Hepatitis C drugs.

 

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