CMS: Healthcare Spending to Increase Over Next Decade

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.

For 2010, healthcare spending is projected to reach $2.6 trillion, accounting for 17.5% of the GDP, up 0.2 percentage point from pre-reform estimates. The economists attribute this growth in large part to postponement of cuts to Medicare physician payments and legislative changes to COBRA premium subsidies.

By 2011, though, public and private health spending is expected to grow more slowly if reductions in the Medicare physician payment rate go into effect—especially the 23% reduction that starts in December 2010 and the expiration of COBRA premium subsidies begins.

Among other CMS projections are:

• From 2015-2019, national health expenditures are projected to grow at an average annual rate of 6.7%, slightly less than the pre-reform projection of 6.8%. This reduction in Medicare spending growth is projected to be 1.4% lower than pre-reform estimates.

• The new administrative function for health reform at HHS is projected to cost $2.4 billion between 2010-2019. Health insurance exchanges are projected to cost $37.7 billion.

• Nearly 93% of people will be insured by 2019—a level nearly 10% higher than the share of the population that was expected to be insured without the passage of healthcare reform.

• Enrollment in Medicaid and the Children's Health Insurance Program is projected to increase by 21.8 million in 2014 to 85.2 million people.