Forecasts for future health spending

Is the war against healthcare inflation being won? Can it be, what with the baby boomer Medicare wave and insurance expansion? The current data offers some answers.

These days, national health spending is not looking so dire, compared to older trends.

In 2013, health spending grew at a notably slow rate of 3.6 percent, and this year, Medicare is spending $1,000 less per beneficiary than the Congressional Budget Office had expected in 2010.

Budget hawks aren’t necessarily celebrating. Though down a fair amount from the boom years of the past two decades, last year’s 3.6 percent growth rate is still above the national inflation rate of 1.5 percent, and much of it may be explained by a slow economic recovery, federal sequestration and increased cost-sharing for commercially-insured patients.

However, while health spending may rise as a proportion of GDP over the next decade, the increase should be at a slower rate than its historical average, according to Centers for Medicare & Medicaid Services economist Andrea Sisko and colleagues, who published their estimates in Health Affairs.

After almost two decades of booming healthcare spending — an average increase of 7 percent each year between 1990 and 2009 — Sisko and colleagues estimate that the average growth rate will hover around 6 percent over the next decade, through 2023, once the baby boom and insurance expansion trends are well under way.

At the same time, healthcare’s share of the national economy could still swell.

Growing and growing for the past half century, healthcare’s share of U.S. GDP has remained fairly constant since 2009 and is projected to represent about 17 percent in 2013.

But the period of healthcare being “a stable share of economic output is projected to end in 2014, primarily because of the coverage expansions of the ACA,” argue Sisko and colleagues.

“It is anticipated that by 2017, once the mostly one-time transition effects of expanded coverage have fully transpired, the health share of GDP will increase, albeit at a slower rate than its historical average, as an improving economy and the aging of the baby-boom generation lead to faster health spending growth,” they write in Health Affairs.

With healthcare spending projected to grow at least 1 percentage point faster than the economy as a whole over the next decade, healthcare’s share of GDP expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023 — and cost containment could stay high in the minds of lawmakers and regulators.