CMS Data Reveals Accelerating US Health Care Costs

Nationwide health costs are expected to increase an average of 5.6% annually and will account for nearly 20% of the US economy by 2025, according to new data released by the Centers for Medicare & Medicaid Services (CMS).

“After an anticipated slowdown in health spending growth for 2016, we expect health spending growth to gradually increase as a result of faster projected growth in medical prices that is only partially offset by slower projected growth in the use and intensity of medical goods and services,” Sean P Keehan, an economist in the office of the actuary at CMS, said in a press release. “Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers, and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services.” 

CMS researchers used the latest economic and demographic data from the 2016 Medicare Trustees Report in order to model national health spending over the next 10 years, according to a report on the study findings published in Health Affairs. Their projections were developed using actuarial and econometric modeling methods and judgments regarding future trends that may influence health care spending. However, the researchers noted that their findings are mostly based on the current law and regulatory environment and do not take into account potential legislative changes under the Trump administration or future presidential administrations. 

Study results showed that for 2016, health spending growth is anticipated to have slowed by 1.1%, to 4.8%. The researchers suggested that this brief reduction in spending growth is likely due to slower Medicaid and prescription drug growth spending. 

However, the researchers found that after 2016, health spending will increase an average of 5.6% per year until 2025. They also found that over this period, health spending will increase
its share of the economy, from 17.8% in 2015 to 19.9% in 2025.

According to the report, specific growth sectors included prescription drug spending, which is expected to grow and average of 6.4% year-over-year until 2025. Drug spending growth slowed from 9% in 2015 to 5% in 2016, mainly due to reductions in spending related to high-priced hepatitis C drugs. Additionally, Medicare spending is expected to grow and average of 7.1% per year until 2015, while Medicaid spending will grow at a projected pace of 5.7% per year.

Furthermore, the researchers found that the proportion of the US population with health insurance is expected to increase from 90.9% in 2015 to 91.5% in 2025.  —David Costill