U.S. Health Care Spending Estimated to More Than Double to $2.8 Trillion Per Year by 2011, CMS Finds
National health care expenditures will more than double between now and 2011 to $2.8 trillion a year, accounting for 17% of gross domestic product, according to projections issued today by the CMS Office of the Actuary. The Chicago Tribune reports that the annual study, published in Health Affairs, found that health spending reached 14% of GDP for the first time last year, "marking the end of nearly a decade of fairly stable health expenditures" of just above 13% of GDP (Graham, Chicago Tribune, 3/12). The report found that health costs are expected to grow at a rate of 7.3% annually between now and 2011. By then, Americans will spend an estimated $9,216 per person on health care, up from $4,637 in 2000 (Washington Post, 3/12). The following is a closer look at some of the report's findings, which are based on spending projections between 2001 and 2011:
- Overall Public-Sector Spending: While expenditures are expected to have accelerated more rapidly in 2001 than had previously been projected, largely as a result of "giveback" legislation that increased Medicare reimbursement rates to doctors and hospitals, public health care spending growth is expected to "moderate greatly" for 2002 and the following years, in part because funding provisions of that legislation will expire. From 2001 to 2011, public health spending is projected to grow an average of 7.3% a year -- a rate slower than the 9% seen in the period from 1990 to 1997 but faster than the 4.5% seen from 1998 to 1999.
- Medicare and Medicaid: Medicare expenses grew at a projected 9.5% rate last year, although that rate is expected to fall to 4% by 2003 based on the expiration of the "giveback" law (Heffler et al., Health Affairs, March/April 2002). However, providers are seeking an increase in Medicare reimbursements, which could push Medicare costs higher (Chicago Tribune, 3/12). Medicaid spending, meanwhile, is projected to grow by 11.5% in 2001, up from an 8.6% rise in 2000, although that rate is also expected to slow in future years.
- Government Public Health Programs: The report projects that public health spending will have increased by 11.8% in 2001 and will rise 16% in 2002, up from an 8.3% increase in 2000. The increase is attributable mainly to increases in bioterrorism preparedness spending.
- Overall Private-Sector Spending: Spending in the private sector is expected to have grown 8.9% in 2001 and to grow 9.4% in 2002, up from a 6.9% increase in 2000. This rise is attributed to the "lagged effect of recent rising household incomes, a shift to less restrictive forms of managed care [and] rising price inflation resulting from the weaker influence of selective contracting and provider consolidation." However, predicting more restrictive managed care and a rise in the number of uninsured, the report projects that private-sector spending growth will decline to 5.9% by 2011.
- Premiums: Private health premiums grew 8.4% in 2000, the highest rate of increase since 1993. The report projects that premium growth hit 9.6% in 2001 and will reach 10.4% in 2002 before leveling off at around 6% by the end of the decade. And while consumers' out-of-pocket costs are "expected to accelerate sharply as well ... the rate of increase is expected to remain below that for private insurance premiums," the report found.
- Hospitals: The report projects a 8.3% increase in hospital spending for 2001, up from a 5.1% rise in 2000 and 3.4% in 1999. The acceleration reflects projected increases in Medicare and private spending through 2002. By 2011, the hospital spending growth rate is projected to fall to 5.1%.
- Prescription Drugs: The report projects a decrease in spending on prescription drugs from 17.3% in 2000 to 10.1% in 2011, down from 19.2% in 1999. The study authors attribute the decline in part to greater cost-sharing among consumers and the less frequent introduction of "blockbuster" medications. The report predicts that between 2001 and 2011, drug spending growth will exceed total health spending growth by almost 5%on average. By 2011, prescription drugs will account for 14.7% of total health expenditures.
- Nursing Homes: Total nursing home spending growth is projected to average 5.5% annually from 2001-2011 and accelerate over that period, "mostly as a result of acceleration in private-sector spending."
Because of the economic recession and greater Medicare and Medicaid spending in the short term, health care expenditures now account for a greater portion of GDP than previously estimated, the study authors note. Nevertheless, the rate of medical inflation is expected to decline from 2003 to 2011. The report concludes that "during this period, real health spending growth is expected to outpace real economic growth, resulting in a continually growing share of the nation's resources being allocated to health care" (Health Affairs, March/April 2002). 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.