All healthcare spending in the United States is projected to grow at an annual average rate of 5.8 percent for the period 2010 through 2020, according to a report released by the Centers for Medicare and Medicaid Services.
This annual increase is 1.1 percentage points faster than expected growth in the gross domestic product (GDP). By 2020, healthcare spending is projected to be 19.8 percent of the GDP, increasing from 17.6 percent in 2010.
By 2020, all healthcare spending will reach almost $4.64 trillion, nearly half of which will come from government sources. These projections, made by economists and actuaries in the Office of the Actuary at CMS include CMS' first-ever sector analysis of the expansions in health coverage required by the Affordable Care Act.
According to Sean Keehan, lead author of the study, the ACA will have only a minor effect on the overall growth rate in the next decade. "Without including the impact of the ACA, the growth rate would be 5.7 percent. The ACA only adds 0.1 percent to growth," Keehan said Wednesday at a press conference.
Analysts expect a spike in the growth rate in 2014, as private and public health offerings are expanded in accordance with the ACA.
Keenan said an 8.3 percent growth rate is projected in 2014 when the ACA goes into effect, due mainly to people seeking prescription medication and physician services for the first time. This is compared to a projected growth rate of 5.5 percent in 2013.
"In 2014, spending on prescription drugs and physician and clinical services will grow quicker than spending on hospital services, reflecting the needs of newly insured Americans, who are expected to be younger and healthier on average than currently insured Americans," said Keehan.
By 2020, the number of uninsured persons is projected to be reduced by nearly 30 million as a result of the ACA.
In 2010, all healthcare spending in the United States is expected to have grown at the historically low rate of 3.9 percent, down slightly from a previous historic low of 4.0 percent in 2009. This continued slow pace of growth in health spending primarily reflects the continuing impact of losses in employment and health insurance coverage associated with the recent recession.
With the GDP growing 3.8 percent in 2010, the portion of the GDP spent on healthcare is expected to have remained unchanged in that year, at 17.6 percent.
Keehan and coauthors project a rise in the percentage of total health spending in the United States that is paid for with local, state and federal government funds.
Rick Foster, CMS' chief actuary, said it is projected that 13 million workers will move off of private insurance when the ACA goes into effect. "We've assumed or expected that in some circumstances with large employers with a low paid workforce, it might be in the best interest of both workers and the employer to discontinue private insurance and move to Medicaid or the exchanges," said Foster.
"Health spending financed by governments at all levels in the U.S. will increase over the next decade as a result of expansions of health insurance coverage through Medicaid and subsidized private health insurance under the Affordable Care Act, as well as Medicare, as more baby boomers enter the program," added Keehan.
Foster said Medicare reimbursement cuts will play a part in slowing growth rates. "There are some provisions in the ACA that do affect the projected growth rate. The adjustments of Medicare payments to most categories of providers clearly slows down the growth rate for Medicare," said Foster. "However, we have noted that in the long range, it might be difficult to sustain that kind of payment schedule."
Other key study findings include:
• Spending on prescription medications is projected to increase by 10.7 percent in 2014, 5.1 percentage points and $15.8 billion more than would have been the case in the absence of the ACA.
• By 2020, drug spending is projected to account for an 11 percent share of national health spending, up from 10 percent in 2013.
• Spending on physician and clinical services is projected to grow by 8.9 percent in 2014, 3.1 percentage points and $17.8 billion more than it would have been without the ACA.
• By 2020, physician and clinical services spending is projected to result in a 19 percent share of national health spending, unchanged from 2013.
• Hospital spending growth is projected to accelerate to 7.2 percent in 2014, one percentage point and $8.6 billion higher as a result of the ACA.
• Total private health insurance spending growth is estimated to have remained low in 2010, at 2.6 percent, up from 1.3 percent in 2009. This slower growth is driven by continuing declines in enrollment in private health insurance plans (down 5.1 million in 2010), as a result of the recent recession.
• Enrollment in private health insurance is expected to increase by 4 million between 2011 and 2013, due mostly to the improving economy and, to a lesser extent, the ACA's requirements to extend private health insurance coverage to dependents under age 26 and the establishment of the Pre-Existing Condition Insurance Program.
• In 2014, Medicaid spending is projected to increase substantially (20.3 percent) as a result of the expanded eligibility for Medicaid required by the ACA.
• By 2020, Medicaid is projected to account for nearly 20 percent of national health spending, up from 15 percent in 2009.
• Growth in Medicare spending for 2010 is estimated to slow from 7.9 percent in 2009 to 4.5 percent in 2010.
• Medicare spending growth through 2013 would slow as a result of the 29.4 percent physician payment rate reduction scheduled for January 1, 2012.
• Medicare's share of national health spending (20 percent) is projected to be the same in 2020 as it was in 2010.