Health Affairs: U.S. healthcare spending to grow 5.7% yearly through 2021

Between 2011 and 2013, U.S. healthcare spending is projected to grow at least 4 percent, on average—slightly above the historically low growth rate of 3.8 percent in 2009, according to an article published June 12 in Health Affairs.

“Preliminary data suggest that growth in consumers’ use of health services remained slow in 2011, and this pattern is expected to accelerate to 7.4 percent as major coverage expansions from the Patient Protection and Affordable Care Act (PPACA) begin,” wrote Sean P. Keehan, senior economist in the Office of the Actuary at the Centers for Medicare & Medicaid Services, and colleagues.

Between 2011 and 2021, national health spending is projected to grow at an average rate of 5.7 percent annually, which would be 0.9 percentage point faster than the expected annual increase in the gross domestic product during this period, according to the authors. The authors predict that national health spending is projected to grow an average of 6.2 percent annually for 2015 through 2021, “because of the net effect of the aging of the population, the provisions of the PPACA and expected improvements in the economy.”

In addition, between 2015 and 2021, drug spending growth is expected to average 6.6 percent per year. “This projection reflects a diminishing impact on spending from patent expirations and benefit-driven conversions to generic drugs, with the percentage of prescriptions accounted for by generics expected to reach 85 percent in 2012,” Keehan and company wrote. “Spending is also expected to be influenced by increasing growth in drug utilization compared to prior years, as new molecular entities and therapeutic biologics enter the market.”

“By 2021, federal, state and local government healthcare spending is projected to be nearly 50 percent of national health expenditures, up from 46 percent in 2011, with federal spending accounting for about two-thirds of the total government share,” they stated. “Rising government spending on healthcare is expected to be driven by faster growth in Medicare enrollment, expanded Medicaid coverage and the introduction of premium and cost-sharing subsidies for health insurance exchange plans.

“By the end of the projection period, higher income growth and the continuing shift of baby boomers into Medicare are expected to cause health spending to grow roughly two percentage points faster than overall economic growth, which is about the same differential experienced over the past 30 years,” the authors concluded.

In a live conference question-and-answer session, the authors noted that they are taking a wait-and-see approach barring the Supreme Court’s decision on the constitutionality of the PPACA. Currently, there are no plans to do new projections immediately after the court decides its ruling but plans could change depending on the decision.