CMS actuaries predict current slowdown in health care spending will not last

The sluggish economic recovery, the continuing impact of the 2 percent across-the-board budget saving measure of sequestration and the growth in high deductible health care plans and other cost sharing measures by payors held back healthcare spending in 2013. However, the trend will not last predict actuaries for the Centers for Medicare and Medicaid Services.

In a report published in the policy journal Health Affairs, the actuaries examine a broad range of factors pushing healthcare spending down and up from now through 2023. They conclude that 2013 health spending growth should have remained slow at 3.6 percent. Starting in 2014, however, the pace of growth begins to pick up again as the economic recovery strengthens, more people acquire insurance under the Affordable Care Act’s coverage expansions and the baby boomer generation drives an overall aging of the population.

According to the report authors, national healthcare spending increases will peak in 2020 at a 6.6 percent annual increase rate. This is lower than the 7.2 percent average annual growth experienced between the years of 1990 and 2008, but it is still what some economists would call unsustainable growth because it is faster than the growth in projected gross domestic product (GDP) for the same time period. The report authors predict that by 2023, healthcare spending will be 19.3 percent of GDP.

The report authors make a few assumptions in their projections, including that the sustainable growth rate (SGR) formula for calculating Medicare physician payments will not be allowed to go into effect and instead physician payment increases will be 0 percent. Current SGR repeal ideas are tied to a modest increase in physician payment for participating in alternate payment systems that seek to reward quality and outcomes.

In addition, the actuaries assume certain cuts in payments for physician services, such as multiple procedure payment reductions (MPPR) cuts, will remain. Furthermore, they assume that the Affordable Care Act’s mandated cuts in Medicare Advantage spending will be allowed to go forward. So far, the U.S. Department of Health and Human Services (HHS) has held off on making these cuts and a change in the party of the Administration or Senate majority in 2016 could mean the cuts are never implemented.

The CMS actuaries report comes on the heels of the non-partisan Congressional Budget Office (CBO) estimate on Medicare and Medicaid spending through 2023. (Read more about the CBO report here.)

The report authors also projected that the number of uninsured Americans will be cut nearly in half over the next 10 years from roughly forty-five million in 2012² to about twenty-three million by 2023.