CMS Predicts Modest Cost Growth For 2012-2013, With Spike In 2014 From Expanded Health Coverage | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

CMS Predicts Modest Cost Growth For 2012-2013, With Spike In 2014 From Expanded Health Coverage

June 12, 2012
by Mark Hagland
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Economists at the Centers for Medicare and Medicaid Services see relatively modest Medicare program cost growth over the next two years

New estimates released on June 12 from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) project that aggregate health care spending in the United States will grow at an average annual rate of 5.7 percent for 2011 through 2021, or 0.9 percentage point faster than the expected growth in the gross domestic product (GDP). The health care share of GDP by 2021 is projected to rise to 19.6 percent, from its 2010 level of 17.9 percent.

By 2021, government spending at all levels for health care is projected to reach nearly 50 percent of total national health expenditures, with the federal government accounting for approximately two-thirds of that share, according to a new study published online in Health Affairs on June 12 and set to be published in the July print edition of that publication.

The projections reflect various factors that can affect health care spending, including an aging population, according to an analysis in Health Affairs by a group of healthcare economists led by Sean P. Keehan, a senior economist in the Office of the Actuary at CMS. Relatively slower economic growth is also expected to affect spending on health care, with modest growth in disposable personal incomes, insurance coverage, and employment rates all limiting expenditures through next year. "The recent recession and the modest economic recovery have played a role in our projection of near historic lows in health spending growth through 2013," says Sean Keehan, the lead author of the study. "However, other factors such as Medicare payment cuts under current law and the patent expirations of several top-selling brand-name drugs have led to projected health spending growth staying at about 4 percent during this period."

Keehan and his team of authors go on to say that "The major effects of the Affordable Care Act on overall spending levels are expected to be felt most acutely in 2014. The coverage expansions associated with the Affordable Care Act for Medicaid and private health insurance are expected to increase the growth rate for health spending to 7.4 percent in 2014, with notable increases in spending on physician services and prescription drugs by the newly insured. Throughout the latter half of the projection period, incomes are expected to be higher, and a large number of baby boomers are anticipated to be receiving coverage under Medicare. Among others, these factors are expected to drive health spending up around 2 percentage points faster than overall economic growth by 2020, consistent with trends in the United States for about the past 30 years."

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