CMS NEWS
FOR IMMEDIATE RELEASE
February 14, 2018
February 14, 2018
Contact: CMS Media Relations
(202) 690-6145 | CMS Media Inquiries
(202) 690-6145 | CMS Media Inquiries
CMS Office of the Actuary releases 2017-2026 Projections of National Health Expenditures
Today the independent CMS Office of the Actuary released the projected national health expenditures for 2017-2026.
National health expenditure growth is expected to average 5.5 percent annually over 2017-2026, according to a report published today as an “Ahead Of Print” by Health Affairs and authored bythe Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS).
Growth in national health spending is projected to be faster than projected growth in Gross Domestic Product (GDP) by 1.0 percentage point over 2017-2026. As a result, the report projects the health share of GDP to rise from 17.9 percent in 2016 to 19.7 percent by 2026.
The outlook for national health spending and enrollment over the next decade is expected to be driven primarily by fundamental economic and demographic factors: trends in disposable personal income, increases in prices for medical goods and services, and shifts in enrollment from private health insurance to Medicare that result from the continued aging of the baby-boom generation into Medicare eligibility.
“Personal healthcare spending” measures spending for medical goods and services provided directly to patients. Over the projection period, growth in personal healthcare prices and growth in the use and intensity of care provided collectively explain about three quarters of the growth in personal healthcare spending.
The report also found that by 2026, federal, state and local governments are projected to finance 47 percent of national health spending, up from 45 percent in 2016.
“Today’s report from the independent CMS Office of the Actuary shows that healthcare spending is expected to continue growing more quickly than the rest of the economy,” said CMS Administrator Seema Verma. “This is yet another call to action for CMS to increase market competition and consumer choice within our programs to help control costs and ensure that our programs are available for future generations.”
These projections are constructed using a current-law framework and include major health provisions from the Tax Cut and Jobs Act and funding throughout the projection period for the Children’s Health Insurance Program. These projections do not reflect other health provisions from the Bipartisan Budget Act of 2018.
Additional findings from the report:
- Total national health spending growth: Growth is projected to have been 4.6 percent in 2017, up slightly from 4.3 percent growth in 2016, as a result of i) accelerating growth in Medicare spending, ii) slightly faster growth in prices for healthcare goods and services, and iii) increases in premiums for insurance purchased through the Marketplaces. In 2018, total health spending is projected to grow by 5.3 percent, driven partly by growth in personal healthcare prices. Growth in personal healthcare prices is projected to rise to 2.2 percent in 2018 from 1.4 percent in 2017, reflecting, in part, faster projected prescription drug price growth as the dollar value of drugs losing patents in 2018 is smaller than in prior years. National health expenditure growth is projected to average 5.5 percent for 2019-2020 largely due to expected faster average growth in Medicare partially offset by slower average growth in private health insurance spending. For 2021-2026, average national health spending growth is projected to increase by an average of 5.7 percent, or 0.2 percentage point faster compared to average growth in 2019-2020. During this timeframe, Medicare spending growth is projected to continue to outpace growth in private health insurance spending, mostly due to enrollment growth (as baby boomers continue to age out of private insurance and into the Medicare program).
- Medicare: Among the major payers for healthcare over the 2017-2026 period, Medicare is projected to experience the most rapid annual growth at 7.4 percent, largely driven by enrollment growth and faster growth in utilization from recent near-historically low rates.
- Private health insurance: Private health insurance spending is projected to average 4.7 percent over 2017-2026, the slowest of the major payers, reflecting low enrollment growth and downward pressure on utilization growth influenced by: i) lagged impact of slowing growth in income in 2016 and 2017, ii) increasing prevalence of high-deductible health plans, and iii) to a lesser extent, repeal of the penalty associated with individual mandate.
- Medicaid: Medicaid is projected to average 5.8 percent annual growth over 2017-2026, which is slower than the average observed for 2014-2016 of 8.3 percent, when the major impacts from the Affordable Care Act’s expansion took place.
- Personal healthcare spending: Over 2017-2026, growth in personal healthcare spending is projected to average 5.5 percent. Among the factors, personal healthcare price growth is anticipated to be the largest factor at 2.5 percentage points, growth in the use and intensity of goods and services is expected to contribute 1.7 percentage points of total growth, and population growth (0.9 percentage point) and changing demographics (0.5 percentage point) account for the remaining growth.
- Prescription drug spending: Among the major sectors of healthcare, spending growth is projected to be fastest for prescription drugs, averaging 6.3 percent for 2017-2026. This is due in part to faster projected drug price growth, particularly by the end of the period, influenced by trends in relatively costlier specialty drugs.
- Insured share of the population: The proportion of the population with health insurance is projected to decrease from 91.1 percent in 2016 to 89.3 percent in 2026, due in part to the elimination of the penalty payments associated with the individual mandate and also to a continuation of a downward trend in the offering and take-up of employer-sponsored health insurance.
The Office of the Actuary’s report will appear at: http://www.cms.gov/
An article about the study is also being published by Health Affairs and is available here: http://www.healthaffairs.org/
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