Healthcare spending is projected to rise modestly over the next decade

The total amount America spends on healthcare will rise modestly over the next decade, continuing a trend that began during the recession, according to new projections from government economists.

However, national health spending is still expected to outpace economic growth, threatening to make medical care increasingly unaffordable.

And by 2024, healthcare is projected to consume 19.6% of the economy, up from 17.4% in 2013, said the report, published in the journal Health Affairs.


“These trends are in contrast to … when health spending growth remained at near historic low rates” during and after the last recession, independent actuaries at the federal Department of Health and Human Services noted in the report.

The annual projections, though necessarily uncertain, provide an important overview of emerging issues in the nation’s large and complex healthcare system.

This year’s report contains some encouraging news.

Though still increasing, healthcare spending is rising far more slowly than it did before the 2008-09 recession, when annual increases averaged 9% through the ’80s, ’90s and 2000s. Spending is projected to grow on average 5.8% annually over the next decade.

The slowdown in total spending growth is happening despite the massive expansion in coverage made possible by the 2010 Affordable Care Act, which is bringing millions of previously uninsured Americans into health plans.

The new report projects that the uninsured rate will decline to just 7.6% in 2024, down from 14% in 2013, before the coverage expansion began.

The number of elderly Americans is also increasing, as baby boomers age, which tends to increase health spending.

Yet Medicare spending is projected to rise relatively slowly, restrained in part by measures to control costs in the 2010 health law.

“Per-capita spending and medical inflation are all at historically very modest levels,” said Andy Slavitt, the Obama administration official who oversees the federal Medicare and Medicaid programs, as well as implementation of the law.

Overall, the new report does not break out the specific effect of the Affordable Care Act.

But the authors said some provisions, such as the expansion of Medicaid and the creation of new insurance subsidies, tend to push up overall health spending, while other provisions, such as cuts in Medicare spending, tend to slow it. “There is a mix,” said John A. Poisal, a co-author.

Other experts believe that changes in the way medical care is delivered, many spurred by the health law, are beginning to have an effect as well, as insurers and government health programs reward physician groups and hospitals that deliver better-quality, more-efficient healthcare.

It is unclear whether this trend will spread more widely, however, said Gigi A. Cuckler, another co-author of the report.

Other trends identified in the report are more worrisome.

Rising costs of specialty drugs, such as new treatments for hepatitis C, for example, threaten to make prescription drug costs skyrocket. Such costs are projected to have risen 12.6% in 2014, the highest rate in a dozen years.

Additionally, the increasing prevalence of high-deductible health plans, though helping to control overall health spending, will continue to place an ever larger burden on Americans.

By 2024, the average American’s annual healthcare tab, including insurance premiums and out-of-pocket expenses such as co-pays and deductibles, is expected to top $4,216, up from $2,618 in 2014, according to the report.

Twitter: @noamlevey


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