Spending on healthcare is expected to quicken over the next decade, driven by people spending more of their disposable income on medical care, an aging population, and increases in the cost of care, according to an analysis by government economists.
The annual analysis released Wednesday by the nonpartisan Office of the Actuary within the Centers for Medicare and Medicaid Services projects that spending will grow by an average of 5.5 percent each year during the period up to 2026, reaching $5.7 trillion.
The analysis assumes the absence of a recession and that no new healthcare laws will be passed. It also takes into account the tax legislation that President Trump signed into law late last year.
It projects that the growth in healthcare spending will continue to be faster than gross domestic product, which is expected to rise at a rate of 4.5 percent. The GDP grew at an annual rate of 2.6 percent in the fourth quarter of 2017, according to the Bureau of Economic Analysis.
Still, the quickening in health spending is not expected to reach the pre-recession levels of 7.3 percent per year.
Healthcare spending had experienced a historically low deceleration from 2008 to 2013, primarily because of the effects of the recession, including people being more cautious about where their money goes and spending less on various parts of their lives, including healthcare.
Consumers will be spending more, economists project, using more than five decades' worth of data to develop their analysis.
"Our models consistently suggest that income is a most substantial driver of health spending growth, that's particularly the case for private health insurance and for out-of-pocket spending," said Gigi Cuckler, an economist in the Office of the Actuary. "During the recession we really saw a substantial response from the health sector to changes in income growth and to changes in economic growth."
She acknowledged as well that actuaries believe that certain payment provisions in Obamacare, which aimed to change the growth of spending for some providers, contributed slightly to some slowing. Officials in the Obama administration often took credit for the deceleration, but actuaries have said that the economy carried more weight.
"When we talk about the most substantial factors that have influenced the projections over the recessionary period, we would argue that it was really the fundamental economic drivers that had the largest impact there," Cuckler said.
That is partly because other parts of Obamacare caused spending to quicken, to roughly 5 percent beginning in 2014, because at that time the law increased spending by covering millions more people under public and private insurance. This brought the rate of uninsured to a historic low, a trend that began to reverse the year Trump took office.
"A lot of people either got coverage at all or got more generous coverage than they had previously," said John Poisal, deputy director for the National Health Statistics Group, said of Obamacare's coverage provisions. "As a result, they became a heavier user of medical goods and services."
He predicted that the trend would not continue long term because enrollment is stabilizing.
Other reasons people, businesses, and the government are expected to spend more on healthcare over the next decade are because the costs of goods and services, such as doctors and hospitals, will continue to increase, partly because healthcare workers will receive higher wages. The rate of spending growth is expected to be highest on prescription drugs, particularly because of the cost of specialty drugs. The yearly increase is expected to average 6.3 percent.
Spending on publicly funded healthcare programs such as Medicare and Medicaid are expected to grow faster than private health insurance spending, mainly because the aging Baby Boom generation will enroll in the programs. That will contribute to the government paying for 47 percent of healthcare by 2026, up from 45 percent in 2016.
Medicaid spending per beneficiary is expected to increase as more people age. The program covers people with disabilities, as well as adults in nursing homes. The cost of the program is expected to increase from $8,011 per person in 2017 to $12,247 per person by 2026.
Medicare's growth will slow slightly, from 5.4 percent in 2017 to 4.3 percent in 2026. This is because as baby boomers age into the program, which they must be 65 and older to qualify for, they will skew the Medicare population younger and have fewer medical needs, at least in the initial years. Medicaid, in contrast, can cover people who are on Medicare, but that typically happens when older adults in the program have additional medical needs that Medicare won't cover, such as nursing home care.