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Healthcare Spending Accelerating in U.S. as Prices, Incomes Rise

News  |  By John Commins  
   February 14, 2018

Prescription drugs will see the fastest average annual spending growth over the eight years, at 6.3% per year, growing from $360 billion in 2018 to $605 billion in 2026, largely because of increased spending on specialty drugs.

The insured share of the population is expected to decline slightly from 91.1% in 2016 to 89.3% in 2026, due to the repeal of the Affordable Care Act’s individual mandate.

Here is a chronological look at projected trends:

2018

  • National health spending growth is projected to increase to 5.3%, up from 4.6% in 2017.
     
  • Medicaid spending growth is projected to increase 4 percentage points, at a projected rate of 6.9%, due to the growth in health insurance spending as a result of smaller risk-mitigation recovery payments from the previous year.
     
  • Private health insurance spending growth is projected to decelerate to 4.8%, down from 5.6% in 2017, due to slower growth in the net cost of insurance in the Marketplace.
     
  • Prescription drug spending growth is anticipated to accelerate from 2.9% in 2017 to 6.6% in 2018, based on the expectation that the dollar value of drugs losing patent protection is less than in previous years.

2019–20

  • National health spending growth is projected to average 5.5%, a slight acceleration from 5.3% in 2018, as a result of faster projected average growth in Medicare spending not fully offset by slower average growth in private healthcare insurance spending.
     
  • Compared to 2018, Medicare spending is projected to grow 2 percentage points faster on average at 8%, reflecting accelerated physician incentive payments under MACRA, and projected growth in the use and intensity of Medicare goods and services.
     
  • Private health insurance spending is projected to slow on average to 4.1%, from 4.8 percent in 2018, due in part to the repeal of the individual mandate.
     
  • The number of uninsured people is projected to increase to 32.7 million by 2020, rising from 30 million projected for 2018.

2021–26

  • National health expenditure growth is projected to accelerate and average 5.7%, up from 5.5% projected for 2019–20.
     
  • Average Medicare and Medicaid spending growth (7.7% and 6.1%, respectively) will continue to outpace that of private health insurance (4.7%) due to the aging of the population, including continued strong enrollment growth.
     
  • In 2026, 47% of national health spending is projected to be sponsored by federal, state, and local governments, up from 45% in 2016. This reflects the shifting demographics including the continued transition of Baby Boomers to Medicare.
     
  • The projected share of health spending by businesses, households, and other private revenues is expected to fall 2 percentage points, from 55% in 2016 to 53% in 2026.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


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