Policy & Regulation News

Is Sustainability the Future of Healthcare Spending Growth?

By Jacqueline DiChiara

- Healthcare spending growth is expected to increase throughout the next decade, according to newly released data from Health Affairs via the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary (OACT).

healthcare spending expenditures

Are future surmised numbers merely heading up, up, and away? In a word, yes. Health spending growth is predicted to increase by an average of 5.8 percent from last year to 2024, confirm the report’s authors: CMS OACT Economists and Actuaries, Sean P. Keehan, Gigi A. Cuckler, Andrea J. Madison, Shelia D. Smith, Devin A. Stone, Christian J. Wolfe, and Joseph M. Lizonitz, and CMS OACT Deputy Director of the National Health Statistics Group, John A. Poisal (Keehan, et al.).

“Recent historically low growth rates in the use of medical goods and services, as well as medical prices, are expected to gradually increase,” say Keehan, et al. “However, in part because of the impact of continued cost-sharing increases that are anticipated among health plans, the acceleration of these growth rates is expected to be modest. The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024,” they add. This projected spending increase mirrors the Affordable Care Act’s (ACA’s) coverage expansions, expedient growth, and an aging population, Keehan, et al. maintain.

The health industry cannot act complacently regarding such anticipated numbers coming into the spotlight, infers CMS Acting Administrator Andy Slavitt. “Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels,” Slavitt states. “The task ahead for all of us is to keep people healthier while spending smarter across all categories of care delivery so that we can sustain these results,” he adds.

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    Once 2014 data is finalized, CMS anticipates healthcare spending will have exceeded $3 trillion – nearly $9,700 per individual. This marks an increase of 5.5 percent from the year prior, a spike caused by the availability of new and costly specialty drugs and millions more acquiring health insurance coverage. CMS additionally notes 2014 saw the highest drug spending growth since 2002 with an increase of 12.6 percent.

    As 2014’s annual growth in per-enrollee expenditures remained slow and steady at 5.4 percent, both Medicare and Medicaid remained slow in comparison with past numbers at 2.7 percent and -0.8 percent, respectively. Medical price inflation was 1.4 percent, CMS confirms, with hospital, physician, and clinical services also increasing “slowly” at a 1.4 and 0.5 percent, respectively.

    “Per-capita premium growth in private health plans is projected to slow to 2.8 percent in 2015 reflecting the expectation of somewhat healthier Marketplace enrollees and the increasing prevalence of high-deductible health plans offered by employers. The authors projected that per-capita premium growth would remain below 6 percent through the end of the projection period (2024),” CMS states, adding that over 19 million additional individuals may enroll in Medicare over the next decade or so as more and more become eligible for Medicare during that time.

    “In 2014, per capita Medicaid spending is projected to have decreased by 0.8 percent as the newly enrolled are expected to be somewhat healthier than those who were enrolled previously. Overall spending, however, is projected to have increased by 12.0 percent in 2014 as a result of a 12.9-percent increase in enrollment related to the ACA coverage expansion,” CMS maintains, adding that out-of-pocket expenses are likely to decrease slightly.

    Reflecting upon the larger, collective picture, Keehan, et al. confirm “relatively modest” projected health spending over the next decade, at an average annual increase of 6 percent. For 3 decades prior to the recession, the average annual growth measured in at about 9 percent, the authors say. Such projections still ring true, even with the authors' understanding that the number of those uninsured may decline by an estimated 18 million, as Keehan, et al. note.

    Although it may be generally much easier to look back and reflect than to look ahead and surmise, whether or not the aforementioned predictions will hold steadfast as the next 11 years unfold remains to be seen. This presented data is essentially a mere static snap shot of a revenue cycle crystal ball as the healthcare industry collectively anticipates what's next around the financial bend.