U.S. Health Care Spending To Increase to $4.3T by 2017, According to CMS

U.S. spending on health care is expected to double by 2017, reaching $4.3 trillion and accounting for nearly 20% of the gross domestic product, up from 16.3% in 2007, according to a CMS forecast published on Tuesday in Health Affairs, the Wall Street Journal reports (Zhang, Wall Street Journal, 2/26). Health care spending is expected to increase by an average of 6.7% annually over the next decade, 1.9 percentage points higher than the general economy each year, according to the study (Wall Street Journal, 2/26). Overall, health spending per person will cost about $13,101 in 2017, up from $7,026 in 2006, CMS projected (Freking, AP/Houston Chronicle, 2/25).

Government spending on health care might nearly double by 2017 to more than $2 trillion (Zhang, Wall Street Journal, 2/26). According to the study, by 2017, health care spending will account for nearly 20% of the U.S. gross domestic product, up from 16.3% in 2007. CMS projected that overall health care spending by 2017 will reach about $4.3 trillion (Washington Post, 2/26).

Private spending on health care will grow by annually 6.6% in 2009 and slow to 5.9% in 2017 as the population ages and enrolls in Medicare, according to the report (Wall Street Journal, 2/26). Spending by federal and state governments will increase to 49% of total health expenditures in 2017, up from 46% in 2006 (AP/Houston Chronicle, 2/25). The report projected that Medicare spending will increase to $844 billion in 2017, compared with $427 billion in 2007. In addition, about 16.4% of Medicare beneficiaries in 2006 were enrolled in private Medicare plans -- which tend to cost the government more -- and 27.5% of beneficiaries are expected to be enrolled in private Medicare plans by 2017, according to the report (Wall Street Journal, 2/26). Medicaid spending is expected to more than double from $338 billion in 2007 to $717 billion in 2017 and is expected to account for one-sixth of U.S. health care spending by that time, according to the report (Baltimore Sun, 2/26).

The report found that the "impact of the population aging is expected ... to have a substantial influence on the public share of spending growth, as the leading edge of the baby-boom generation becomes eligible for Medicare" (Wall Street Journal, 2/26).

Other Spending
The report predicted that U.S. prescription drug spending would increase to $1,537 per person by 2017, up from $761 per person in 2007. Individual spending on prescription drugs will stay the same at about 18% of total drug costs, while the share covered by private insurance will decrease from about 41% to 33%. The amount covered by public insurance will increase from 40% to 49% in 2017, the report found (Baltimore Sun, 2/26). Out-of-pocket consumer spending will increase by 6% by 2017, from $269.3 billion in 2007 to $464.3 billion, according to the report.

In addition, hospital spending, which increased from 7% in 2006 to 7.5% in 2007, is expected to slow to 6.4% over the next decade because of a decreased demand for services corresponding with a slower growth in income (Newark Star-Ledger, 2/26). Researchers also predicted that in-home care approximately will double from $178 per person in 2007 to $343 per person in 2016. However, spending on nursing home care is expected to increase by about 55% from $421 per person in 2007 to $652 per person in 2016.

Comments
Sean Keehan, an economist at CMS and one of the authors of the report, said the trend in health care spending indicates that "policymakers, insurers and the public collectively face some difficult decisions about the way health care is delivered and paid for."

Acting CMS Administrator Kerry Weems said that the report "reminds us that we need to accelerate our efforts to improve our health care delivery system to make sure that Medicare and Medicaid are sustainable for future generations of beneficiaries and taxpayers" (Lipman, Cox/Atlanta Journal-Constitution, 2/26).

The study is available online.

A HealthCast of a briefing on the CMS report is available online at kaisernetwork.org.