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US health spending projected to grow 5.8% annually over decade, will hit $5.6 trillion

Healthcare
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You may have to visit the ophthalmologist after checking out these eye-popping new health spending numbers.

Health care is expected to account for more than $1 out of every $5 spent in the United States by 2025, according to a new government projection announced Wednesday, which also estimated that health spending will increase by a historically moderate rate of 5.8 percent annually over the decade.

By 2025, a staggering $5.6 trillion will be spent in the U.S. on health care — compared to an estimated $3.2 trillion this year, the Office of the Actuary at the Centers for Medicare and Medicaid Services said in its projection.

That works out to an estimated per-person health spending total of about $16,032 by 2025, compared to $9,960 spent per person in 2015.

A decade from now, the office estimates, 8 percent of Americans will lack health insurance, compared to the 11 percent who were uninsured in 2014.

Health spending accounted for 17.5 percent of the nation's gross domestic product in 2014.

The projection that health spending will comprise 20.1 percent of GDP by 2025 reflects the fact that such spending is expected to outpace overall inflation by 1.3 percentage points annually from 2015 to 2025.

Health spending is expected to grow at a faster rate than those seen in recent years, but "is slower than in the two decades before the recent Great Recession," officials in the Office of the Actuary wrote in a report on the projection for 2015-2025, published online by the journal Health Affairs.

"Growth in health spending is expected to be influenced by changes in economic growth, faster growth in medical prices, and population aging," according to the report, whose 5.8 percent annual projected growth rate is identical to what the office had predicted last year for the 2014 to 2024 time frame.

But the office also said that the rate of increase in such spending will be lower than the nearly 8 percent rate seen annually prior to 2008, in part as a result of trends that include consumers being forced to pay a larger share of their health-care services out of pocket, as opposed to their insurance plans paying, and by various updates in how Medicare pays for services. Medicare is the federally run health coverage program for primarily senior citizens.

The Office of the Actuary projects that by 2025, a total of 47 percent of all health spending will be sponsored by federal, state and local governments, which would be nearly 3 percentage points higher than the level seen in 2014. The higher share reflects the increase in health spending spurred by the Affordable Care Act, which has subsidized insurance enrollment by millions of people, and which has expanded Medicaid benefits to millions more.

Prescription drug spending will be a smaller driver of spending growth in the future than it has recently been, according to the projections. From 2016 through 2025, drug spending is expected to grow by an average of 6.7 percent annually. That compares to 12.2 percent in 2014, and 8.1 percent last year, when the drug market saw the effect of pricey new specialty drugs, including medications used to treat hepatitis C.

The Obama administration often has cited the ACA as a reason for the historic slowdown in health spending that has been seen on the heels of the Great Recession. But that view is not universally shared. Some health-care experts outside of the administration say it is not clear, at all, that the ACA has had a big impact on bending the cost curve.

On Wednesday, Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, said, in light of the new projections, "The Affordable Care Act continues to help keep overall health spending growth at a modest level and at a lower growth rate than the previous two decades."

"This progress is occurring while also helping more Americans get coverage, often for the first time," Slavitt said.

During a conference call with health reporters on Wednesday, officials from the Office of the Actuary were asked whether they are able to detect whether things such as moderate price growth over the past several years, or slowdowns in health services usage is being influenced by the provisions of the ACA.

Sean Keehan, an economist in the office, said that "the expansion of narrow network insurance is one factor that is expected to keep cost growth and price growth low."

A network is the collection of hospitals, doctors and other health providers covered by an insurance plan. Narrow networks often have lower premiums than plans with larger networks because they have negotiated lower prices from providers in exchange for effectively steering insured customers to use their services.

But Keehan's colleague, John Poisal, deputy director of the National Health Statistics Group in the actuary's office, added that "in terms of our ability to sort of quantitatively estimate what the impact [from Obamacare] will be, we do not have that capability at the moment."

Correction: Andy Slavitt is acting administrator of the Centers for Medicare and Medicaid Services and he spoke on Wednesday. An earlier version misstated his title and the day he spoke. Officials from the Office of the Actuary had a conference call with reporters on Wednesday. An earlier version misstated the day.