Healthcare Spending Expected to Rise

Healthcare spending is expected to accelerate over the next decade, but the pace of growth won’t match pre-recession levels, according to a new study.

The Centers for Medicare and Medicaid Services (CMS) this week released a new report showing overall US healthcare expenditures grew by 3.6% last year to $2.9 trillion. Spending is expected to grow by another 5.6% this year, to $3.1 trillion.

By 2023, Americans will spend an estimated $5.2 trillion, at which point spending will be growing by an expected 6.3% per year.

The data are published in the September edition of Health Affairs.

The report attributes the growth to expanded coverage under the Affordable Care Act, as well as more favorable economic conditions generally. Healthcare spending is expected to grow at a faster clip than the overall economy, meaning healthcare’s share of the gross domestic product will increase from 17.2% in 2012 to 19.3% in 2023, should the projections bear out.

However, those numbers still represent a significant slowdown from the 7.2% average growth from 1990 until the start of the economic recession in 2008.

Physicians and clinical services

Spending on physicians and clinical services is expected to be on something of a rollercoaster over the next few years. Spending in that category slowed down to 3.3% in 2013, topping out at an estimated $583.9 billion.

“This is partly because of reductions in payments to Medicare providers resulting from the sequester and procedural payment changes,” the authors note, referring to the automatic spending cuts that stifled federal spending in early 2013.

However, this year, spending is projected to rebound strongly, to $618.5 billion, an increase of 5.9%.

“This acceleration is influenced by expectations that the people who are newly insured — in particular those newly covered by Medicaid — will be younger than the currently insured and thus will devote a higher share of their healthcare spending to these services relative to more acute hospital care,” the report stated.

In 2015, temporary payment increases for Medicaid providers are scheduled to end, and lower Medicare Advantage payments are scheduled to go into effect. The result: only 3.8% growth.

However, over the longer-term, spending on physicians and clinical services is set to continue to rise, topping $1 trillion by 2023.