Report: Health Spending To Increase Slowly Until Reform Law Takes Effect
U.S. health spending will increase at historic lows over the next two years, but will grow more quickly once most provisions of the federal health reform law are implemented in 2014, according to a report by CMS' Office of the Actuary, the Wall Street Journal reports.
The report -- published in the journal Health Affairs -- notes that health care spending increased by 3.8% in 2009, followed by a 3.9% rise in 2010. Although 2011 spending has not yet been calculated, CMS economists projected similar increases of about 4% annually through 2013.
When the health reform law is fully implemented in 2014, spending will increase by 7.4%, the report found. The report notes that the majority of the spending increases that year will be related to prescription drugs and routine physician visits, along with greater spending on insurance in general and government administration.
The actuaries anticipate spending growth will slow again beginning in 2015 and average 6.2% annually through 2021 (Radnofsky, Wall Street Journal, 6/12).
Medicaid spending is expected to increase by 7% next year, before increasing by 18% in 2014 because of expanded Medicaid eligibility under the overhaul. The report estimates that although overall spending will rise, per-beneficiary spending will decrease by about $1,100, to about $7,600. The report attributes that decrease to the program expansion resulting in more "younger and healthier" beneficiaries.
The report also found that Medicaid will account for 20% of all U.S. health expenditures at the end of the decade, compared with 15% now.
Medicare spending will rise over the next decade, from 4.5% annually between 2011 and 2013, to 6.1% in 2014 and 6.8% between 2015 and 2021 (Reichard , CQ HealthBeat, 6/12).
The report assumes Medicare spending will be reduced by 2% next year as part of efforts to reduce the federal budget deficit and that physicians will face a 31% reduction to Medicare reimbursement rates under the sustainable growth rate formula (Morgan, Reuters, 6/12).
However, the reimbursement reductions are unlikely to happen because Congress is expected to postpone them (Walker, MedPage Today, 6/12).
The report also found that:
- Prescription drug spending is expected to increase by 8.8% in 2014, compared with 4.1% before implementation of the overhaul; and
- Spending on physician and clinical services will increase by 8.5%, compared with 5.3% without the overhaul (Reichard , CQ HealthBeat, 6/12).
CMS economists found that health spending will account for 19.6% of the gross domestic product in 2021, compared with 17.9% in 2010 (Torres, "Capsules," Kaiser Health News, 6/12).
Meanwhile, government spending -- at the federal, state and local levels -- is expected to make up nearly 50% of all U.S. health care spending in 2021, compared with about 46% in 2011.
Effect of Health Reform
Although the health reform law would add $478 billion to U.S. health care spending over the report's 10-year projections, the overhaul "barely boosts" the annual growth rate, CQ HealthBeat reports. Without the health reform law, health spending would increase by 5.6% annually, compared with 5.7% with the overhaul in place.
The report also notes that the overhaul is expected to reduce the number of uninsured U.S. residents by 30 million and that the law will decrease spending between 2015 and 2021 by about 0.1% annually because of Medicare cuts and a new tax on high-cost insurance plans (Reichard , CQ HealthBeat, 6/12).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.