|National Healthcare Expenditures Projected To Double By 2017 To $4.3 Trillion
National healthcare expenditures are projected to double
by 2017 and reach $4.3 trillion, according to a report issued by the
Centers for Medicare and Medicaid Services (CMS).
Growth in healthcare spending in the United States is
projected to be 6.7 percent in 2007, according to the report and the
average annual growth is expected to remain near that rate through
2017, the report said.
As a percentage of the gross domestic product (GDP),
healthcare spending is projected to increase to 16.3 percent in 2007
from 16.0 percent in 2006. By the end of the projection ten-year
period,healthcare spending in the United States is expected to reach
just over $4.3 trillion and comprise 19.5 percent of the GDP. The
ten-year estimates follow last month’s report from the government
that health spending in 2006 surpassed $2.1 trillion for the first
time, accounting for 16.0 percent of the GDP.
The analysis was prepared by CMS’s Office of the
Actuary and published online by the journal Health Affairs. Over the
full projection period (2007-2017), annual growth in health spending is
anticipated to be higher than annual growth in both the overall economy
(4.9 percent) and in general inflation (2.4 percent).
For health spending through public programs, growth is
anticipated to decelerate to 6.8 percent in 2008 after the 8.2 percent
growth in 2006 that was largely influenced by the implementation of the
Medicare Part D drug benefit. Public health spending growth is then
expected to gradually increase toward the end of the projection period,
as the leading edge of the baby boom generation begins to enroll in
Through 2017, growth in health spending is expected to
outpace that of the GDP by an annual average of 1.9 percentage points.
This projected differential in growth rates is smaller than the 2.7
percentage-point average difference experienced over the past 30 years,
but wider than the average differential (0.3 percentage point) observed
for 2004 through 2006.
Growth in private health expenditures (which includes
out-of-pocket and private health insurance spending) is expected to
rebound to 6.3 percent in 2007 following the somewhat slow growth of
5.4 percent in 2006 that was related to the implementation of Medicare
Part D. Private spending growth is expected to peak in 2009 at 6.6
percent, then decelerate through 2017 in response to projected slower
economic growth in the latter years of the projection period.
Prescription drug spending growth is expected to slow to
6.7 percent in 2007 (from 8.5 percent in 2006), driven largely by
slower drug price growth. For 2008 through 2017, prescription drug
spending is projected to accelerate due in part to the projected
leveling off of growth in the generic dispensing rate and evolving
treatment guidelines that call for earlier introductions of
pharmacotherapy. The Medicare Part D benefit, on the other hand, is
expected to have very little impact on total national health
expenditure growth through 2017, as per capita spending growth for
Medicare beneficiaries is expected to be identical to that of the rest
of the population.
Hospital spending growth is expected to accelerate from
7.0 percent in 2006 to 7.5 percent in 2007, partly attributable to
higher Medicaid payment rates. Hospital spending growth is then
projected to decrease slightly, through the rest of the projection
period with the growth in demand for hospital services expected to
In December 2007, Congress passed the Medicare,
Medicaid, and S-CHIP Extension Act (MMSEA), providing a 0.5 percent
increase to the Medicare Physician Fee Schedule (MPFS) for the first
six months of 2008, followed by a 10.6 percent reduction in the MPFS
for the second six months of 2008.
This CMS projection of health spending growth does not
include the impacts of the MMSEA, but rather features a new simulation
of an annual zero percent increase to the MPFS and compares that to the
anticipated impact of negative payment updates that were in the law
before the MMSEA was enacted. Based on this simulation, by 2017, annual
zero percent updates to the MPFS would be expected to result in
Medicare physician spending and overall Medicare spending totals that
are 25.3 percent and 6.4 percent higher, respectively, when compared to
the expected spending associated withnegative payment updates to the
The effect of a zero percent MPFS update on total health
spending is projected to be much smaller, however, with total
healthcare spending estimated to be 0.7 percent higher in 2017.
Medicare spending growth is expected to slow to 6.5
percent in 2007, following the 18.7 percent growth experienced in 2006.
Nearly all the projected slowdown in growth for Medicare in 2007 is
related to the new spending that was devoted to the Medicare Part D
benefit in 2006, spending that simply continues into 2007 and is no
longer new to the program. Also contributing modestly to the projected
slowdown are reduced increases in Medicare Advantage plan payments for
2007 as a result of risk adjustments made to these payments. In the
latter years of the projection, Medicare growth is expected to
accelerate, reaching 8.0 percent by 2017, as the baby boom generation
begins to enroll in the program.
Following a decline of 0.9 percent growth in 2006
(associated with the shift in drug coverage for beneficiaries
dually-eligible for Medicaid and Medicare to Medicare Part D), Medicaid
spending growth is projected to be 8.9 percent in 2007. Aside from the
one-time transition effects of Medicare Part D, contributing to this
expected acceleration in growth are increases to payment rates for
hospitals and physicians. On average, Medicaid spending is anticipated
to grow 7.9 percent per year over the projection period and account for
16.8 percent of total healthcare spending by 2017.
Address: Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244; (877) 267-2323, www.cms.gov.