National health expenditure growth is expected to average 5.5 percent annually over 2017-2026, according to the annual report by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary. At this rate, 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—health spending rising from $3.3 trillion in 2016 to $5.7 trillion by 2026.
The annual CMS Actuary report was published in the early release March issue of Health Affairs. The projected national health spending and enrollment growth over the next decade “is largely driven by fundamental economic and demographic factors: changes in projected income growth, increases in prices for medical goods and services, and enrollment shifts from private health insurance to Medicare that are related to the aging of the population,” according to the journal.
"For single years, by 2020 home health is projected to be the fastest growing sector at 6.7 percent annually, from 5.1 percent in 2017: in projected expenditures, from $97.1 billion in 2017 to $117.1 billion in 2020, to $172.6 billion in 2026."
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.”
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.
Prescription Drugs, Home Health Fastest Growing Sectors
Among the major healthcare sectors, 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.
However, for single years, by 2020 home health is projected to be the fastest growing sector at 6.7 percent annually, from 5.1 percent in 2017: in projected expenditures, from $97.1 billion in 2017 to $117.1 billion in 2020, to $172.6 billion in 2026.
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 occurred.
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 produces short-term (10-year) projections of healthcare spending for categories in the National Health Expenditure Accounts (NHEA) on an annual basis. Title of the Health Affairs article: “National Health Expenditure Projections, 2017–26: Despite Uncertainty, Fundamentals Primarily Drive Spending Growth.”
By: Ronald M. Schwartz, Writier, The Remington Report