Health Expenditure Will Constitute 20% of the U.S. Economy within a Decade

A new report projects that aggregate spending on healthcare in the United States will increase by 5.8% per annum until 2025.

The report, by the U.S. Centers for Medicare & Medicaid Service (CMS, Baltimore, MD, USA), states that the average projected annual growth rate is 1.3% faster than annual growth in the gross domestic product (GDP), and as a result health expenditure is expected to increase from 17.5% in 2014 to 20.1% by 2025. CMS stressed, however, that the average still remains lower than the average growth over the previous two decades before 2008, which was nearly 8%. Overall, national health expenditures are estimated to have reached USD 3.2 trillion in 2015, or just over USD 10,000 for every man, woman, and child.

Other findings of the report are that prescription drug spending is projected to grow an average of 6.7% per year for 2016 through 2025; spending on physician and clinical services will rise by 4.5% in 2016; the insured share of the population is expected to continue to rise from 89% in 2014 to 92% by 2025; and private health insurance expenditures are estimated to have reached USD one trillion in 2015. In 2015, Medicare expenditures were USD 647.3 billion, a 4.6% increase from 2014, driven partly by increased enrollment.

The report also comments that as the initial impacts associated with the 2010 federal Affordable Care Act coverage expansions fade, growth in health spending will be influenced by changes in economic growth, faster growth in medical prices, and population aging. In addition, the share of total health expenditures paid for by U.S. federal, state, and local governments is projected to increase to 47% by 2025. The report was published in the July 2016 issue of Health Affairs.

“The Affordable Care Act continues to help keep overall health spending growth at a modest level and at a lower growth rate than the previous two decades. This progress is occurring while also helping more Americans get coverage, often for the first time,” said Andy Slavitt, acting administrator of CMS. “Per-capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems. As we look to the future we must continue our efforts that keep people healthy, providing access to affordable, quality care, while spending smarter across all categories of care delivery.”

Related Links:
U.S. Centers for Medicare & Medicaid Service