National Healthcare Expenditures Expected to Reach $5.5T by 2026
The CMS Office of the Actuary believes that national healthcare expenditures will increase to $5.5 trillion by 2026, growing at a rate of 5.5 percent each year.
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By - The CMS Office the Actuary forecasts that national healthcare expenditures will reach $5.5 trillion by 2026 due to a 5.5 percent yearly growth rate.
CMS said that the anticipated average growth rate of healthcare spending is lower than the 2000 to 2007 rate (7.3 percent each year) but is higher than the healthcare spending growth rate from 2008 to 2016 (4.6 percent).
“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 related to the aging of the population,” CMS said.
CMS projects the largest national spending changes within Medicare, Medicaid, and moderate spending growth in private insurance.
Medicare
Medicare spending growth is projected to have accelerated from 3.6 percent in 2016 to 5.0 percent in 2017. CMS believes that faster enrollment and faster spending per beneficiary led to the sharp increase.
Medicare spending growth is expected to sharply rise from 2019 to 2020 at a rate of 8 percent per year.
CMS estimates that future spending will grow because the use of incentive payments made to physicians under MACRA as well as projected increases to growth in volume of goods and services provided to beneficiaries.
Medicare spending is projected to grow by 7.7 percent from 2021 to 2026, which is slightly slower than 2019 rates.
Medicaid
Medicaid spending is estimated to have grown slower in 2017, at 2.9 percent, compared to a 3.9 percent growth rate in 2016. CMS attributed lower Medicaid spending growth to expected reductions in net benefit spending.
Healthcare spending in 2018 is expected to grow because of the price of healthcare services and from increased growth in Medicaid spending, CMS said. The net cost of Medicaid during 2018 is expected to accelerate Medicaid spending by 6.9 percent in 2018.
Medicaid spending is projected to grow by 6.1 percent from 2021 to 2026 because of increasing numbers of expensive and disabled enrollees in the Medicaid program.
Private insurance
Private insurance spending growth jumped 0.5 percentage points to 5.6 percent between 2016 and 2017, partly due to increases Marketplace premiums.
However, private insurance spending growth is expected to decelerate by 0.7 percent during 2019-20.
Private insurance spending growth is expected to decelerate to 4.7 percent each year, from 2021 to 2026, as more baby boomers age into Medicare.
“This trend is driven primarily by slower enrollment growth, which is associated with the continued shift of the baby-boom generation from private health insurance to Medicare, as well as slower anticipated employment growth in the latter half of the projection period,” CMS said. “In addition, the excise tax on high-cost insurance plans (scheduled to take effect in 2022) is also anticipated to contribute to slower growth in private health insurance spending.”
CMS projects that federal, state, and local governments will cover 47 percent of total national health expenditures by 2026.
In contrast, private insurance-related national healthcare spending is expected to decrease, from 55 percent in 2016 to 53 percent in 2026, as more beneficiaries elect to enroll in Medicare instead of a private health plan.
