Medicare, Other U.S. Health Care
Spending to Grow More Slowly in Years Ahead
Despite longer lives, growing senior
population; Affordable Care Act constrains fee-for-service and private
plan payment growth, says report from Centers for Medicare & Medicaid
Services (CMS) Office of the Actuary
Increasing life expectancy continues to drive population,
elderly growth. Click image for larger view)
Sept. 23, 2013 - Medicare spending
between 2015 and 2022 is expected to increase from the annual growth of
4.6 percent estimated for 2012, but it will be well below the previous
decade’s 9.3 percent rate of growth as the Affordable Care Act
constrains fee-for-service and private plan payment growth, according to
a report by from the Centers for Medicare & Medicaid Services (CMS)
Office of the Actuary. The report also says spending growth over the
next ten years for all U.S. health care will be modest in comparison to
Low rates of health spending growth
are anticipated to continue through 2013 in key areas such as hospital
and drug spending.
The National Health Expenditure
projections report, issued annually, contains estimates of spending for
health care in the U.S. over the next decade by type of service and
source of funding. The study is currently available online and will be
published in the October issue of the journal Health Affairs.
As past years’ reports have found,
this year’s report projected that health spending growth would rise in
coming years from historically low levels due to more available and
affordable care and an influx of baby boomers into the Medicare program
with a greater need for health care as they age.
The Actuary’s office also projected
that rates of health care spending over the next decade in several major
categories would be below their peak rates in the previous decade,
including hospital and prescription drug spending, out-of-pocket
spending, and Medicare spending.
“We are on the right track to
controlling health care costs, thanks in part to the Affordable Care
Act,” said CMS Administrator Marilyn Tavenner. “More Americans will have
the ability to get the health care they need, and that is a good thing.
We have identified several areas where our reforms to control costs are
making progress and we must build on those efforts in the years ahead.”
The report’s findings include:
• Medicare spending growth has
slowed. Medicare spending growth is estimated to have slowed to 4.6
percent in 2012, down from 6.2 percent in 2011 for a total of $579.9
billion. While increases in the number of Medicare enrollees,
utilization and input prices will lead to an annual increase of 7.4
percent between 2015 and 2022 according to the report, it will be well
below the previous decade’s 9.3 percent rate of growth as the Affordable
Care Act constrains fee-for-service and private plan payment growth.
• Out-of-pocket spending will be
lower as people have more affordable coverage. By 2022, the share of
total health spending attributable to out-of-pocket spending is
projected to fall from 11.4 percent in 2012 to 9.1 percent, largely as a
result of expanded insurance coverage through Medicaid and the
• Low growth in hospital
spending. For the third consecutive year, spending increases on hospital
services are projected to be below five percent. For 2015 to 2022,
growth in total hospital spending is projected to average 6.3 percent
per year. Over this period, hospital spending is impacted by a number
of factors, including increases in spending among the newly covered,
improvements in the economy that are expected to lead to more use of
services, aging of the US population, and Medicare hospital payment
update reductions that have been cumulatively impacting spending since
• Prescription drug spending is
lower. In 2012, prescription drug spending is estimated to have declined
0.8 percent, which is down from 2.9 percent growth in 2011, as several
popular brand-name drugs lost patent protection. From 2015 to 2022,
projected annual average growth in prescription drug spending will be
6.5 percent as increases in insurance coverage and disposable income
enable more consumers to fill prescriptions. This rate is below the
average annual growth of 8.6 percent between 2000 and 2009.
• Physician and clinical
services spending has remained low compared to previous years. Spending
on physician and clinical services is estimated to have grown 4.6
percent in 2012, compared to 4.3 percent in 2011. The Actuary’s office
projects that physician and clinical services spending will rise to 7.1
percent in 2014, when more Americans will have health insurance and
utilize physician services. These projections do not take into account
Medicare physician payment cuts under the Sustainable Growth Rate
formula, which—if not overridden by Congress—would restrain growth in
spending for physicians’ services to 4.7 percent.
Medicare Open Enrollment
Oct. 15 - Dec. 7
people with Medicare can choose their plans for 2014
• Medicaid spending per person
will fall in 2014. According to the report, per enrollee Medicaid
spending is expected to decline by 2.8 percent in 2014, due to the entry
of non-disabled children and younger and nondisabled adults into the
Medicaid program. The program will cover nearly 9 million newly insured
Americans, leading to a rise in Medicaid spending of 12.2 percent in
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