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CMS: Healthcare Spending to Increase Over Next Decade

Janice Simmons, for HealthLeaders Media, September 9, 2010

Healthcare spending nationwide appears not to be slowing down as much as initially anticipated since healthcare reform legislation was approved this past spring, according to figures released Thursday the Centers for Medicare & Medicaid Services.

Currently, spending is expected to reach about $4.6 trillion by 2019—growing at an average annual rate of 6.3% over the next decade, they state in a new report in Health Affairs. However, they had projected an annual growth rate of 6.1% in February—one month before the reform legislation was signed into law.

In addition, healthcare is now expected to account for 19.6% of the gross domestic product (GDP) by 2019, which is 0.3% higher than projections made in February. This means that close to $1 out of every $5 will be used to purchase healthcare, they added.

"While the estimated net impact of the Affordable Care Act and other legislative and regulatory care changes are moderate, the underlying effect of these changes on coverage and financing are more pronounced," says CMS economist Andrea Sisko, one of the study coauthors.

For example, the economists are projecting an increase in spending by a greater number of insured individuals. This is largely offset, though, by slower projected Medicare spending growth, as well as lowered Medicaid prices paid to providers to render services to newly insured Medicaid recipients, Sisko added.

In 2014—the year in which many ACA expansions of coverage take place—faster spending growth is predicted for private health insurance spending, as well as for Medicaid and the Children's Health Insurance Program, Sisko says.

Specifically, this expanded coverage is expected to increase by 9.2%—which is higher than the 6.6% rate proposed in February, Sisko said. In addition, public spending is projected to increase by 9.7% in 2014, while private spending is expected to increase by 8.6%. However, with more people insured in 2014, out-of-pocket spending could decline by 1.1%—instead of rising 6.4% as projected earlier in the year.

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