CMS: Health care spending growth is expected to average 5.8% annually until 2025

Total health care spending growth is expected to average 5.8% annually over 2015-2025, according to a report from the Centers for Medicare & Medicaid Services’ Office of the Actuary (OACT), published July 13 by Health Affairs and authored. Projected national health spending growth remains lower than the average over previous two decades before 2008 (nearly 8%).

"The Affordable Care Act continues to help keep overall health spending growth at a modest level and at a lower growth rate than the previous two decades. This progress is occurring while also helping more Americans get coverage, often for the first time," said CMS Acting Administrator Andy Slavitt. “Per-capita spending and medical inflation also remain at historically very modest levels, demonstrating the importance of continuing to reform our delivery systems. As we look to the future we must continue our efforts that keep people healthy, providing access to affordable, quality care, while spending smarter across all categories of care delivery.”In 2015, medical price growth is estimated to continue to be very low, helping to restrain overall health spending growth. In addition, the Medicare program is testing various alternative payment approaches, which may provide some relief to long-term spending growth, even as a record number of people age into Medicare. Overall, national health expenditures are estimated to have reached $3.2 trillion in 2015.

Health spending is projected to grow 1.3 %age points faster than Gross Domestic Product (GDP) per year over 2015-2025; as a result, the health share of GDP is expected to rise from 17.5% in 2014 to 20.1% by 2025. Federal, state and local governments are projected to finance 47% of national health spending (up from 45% in 2014).

Other findings from the report:

National health spending growth is estimated to have been 5.5% in 2015. By 2016, slower growth in health spending of 4.8% is projected as the enrollment in Medicaid and Marketplace plans slows and the associated declines in the number of the uninsured decreases. Total annual health care spending growth is expected to average 5.8% over 2015-2025.

In 2015, medical price inflationslowed to 0.8%, down from 1.4% in 2014. Hospital prices increased by 0.9% while price growth in physician services fell by 1.1%.

The share of health expenses that Americans payout-of-pocket is projected to decline from 10.9% in 2014 to 9.9% in 2025.

The insured share of the population is expected to continue to rise from 89% in 2014 to 92% by 2025.

Private health insurance expenditures are estimated to have increased by 5.1% from 2014 to 2015, reaching $1.0 trillion. Thereafter, average annual growth through 2025 is expected to be similar (5.4%).

Medicaid spending growth is slowing significantly in 2016, to 5.3 %, which the report attributes to slower enrollment growth and stronger utilization management. Spending growth is expected to average 5.6% for 2017-19, lower than in 2014-15.

In 2015, Medicare expenditures are expected to have been $647.3 billion, a 4.6% increase from 2014, driven partly by increased enrollment. However, per-enrollee costs are estimated to have increased by only 2.4%, the same as the previous year, continuing the recent trend of low per-enrollee cost increases.

Prescription drug spending is projected to grow an average of 6.7% per year for 2016 through 2025. This follows growth of 12.2% in 2014 and 8.1% in 2015 when spending growth was influenced by the introduction of expensive new specialty drugs such as those used to treat Hepatitis C.