Health Spending Projected to Increase Over Next Decade

A new report projects that slow growth in health spending in 2013 will be followed by substantial increases over the next decade, expected to be driven by increased coverage due to the Affordable Care Act, economic growth and aging Baby Boomers.

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The estimates, released Wednesday from the Office of the Actuary at the Centers for Medicare and Medicaid Services, suggest that in 2013, health spending will have increased by a “slow” rate of 3.6%. In 2014, health spending is projected to increase by 5.6%, followed by an average projected growth of 6.0% from 2015 through 2023.

These projections would mean health-care spending is exceeding economic growth. From 2013 through 2023, the average rate of projected growth comes out to 5.7%, outpacing average GDP growth by 1.1%.

However, the study’s lead author Andrea Sisko says despite the ramp up in costs over the next decade, the average projected increase is slower than it was in recent years. From 1990 to 2008, the average rate of growth came to 7.2%, with health-care spending exceeding GDP growth by 2.0%.

“Analysis of historical trends tells us that health care spending tracks with economic growth, so as the economy is anticipated to improve over the next decade, health spending growth is projected to grow faster,” said Sisko in a statement released Wednesday. “This, in addition to the Baby Boomers aging and increased insurance coverage mandated by ACA, is expected to result in the health share of GDP rising to nearly one-fifth of the nation’s economy by 2023.”

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Indeed, the report estimates that health spending will rise to 19.3% of total GDP by 2023, an increase of just over 2 percentage points in 2012, when it equaled 17.2% of GDP.

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