Healthcare spending is projected to climb to nearly 20 percent of the nation’s economy over the next decade, with higher medical prices a key driver.
The federal estimate released Thursday and published in the journal Health Affairs projects that national health spending will grow at a rate of 5.6 percent from 2016 to 2025. That outpaces average projected gross domestic product growth by 1.2 percentage points.
The estimate of 5.6 percent hews closely to the estimates for 2014 and 2015, when major parts of Obamacare were implemented. During those years, healthcare spending growth over the next decade was projected to be 5.5 percent.
Higher Medicare and Medicaid expenditures and higher private insurance spending are key contributors to the uptick in growth.
But the estimate from actuaries with the Centers for Medicare and Medicaid Services doesn’t take into account any potential major changes to the healthcare industry, chiefly the repeal of Obamacare.
“We do these projections on a current law basis. We haven’t taken into consideration any proposed policies,” said Sean Keehan, one of the study’s authors, in a call with reporters Wednesday.
Republicans and President Trump aim to repeal Obamacare but have yet to bring up legislation in Congress to do so. House Speaker Paul Ryan, R-Wis., has said that he intends to finish legislating on Obamacare this year.
While the report doesn’t take into account Obamacare repeal and replace, it does delve into how spending growth could shape up for Medicare and Medicaid.
In 2016 and 2017, Medicaid spending was projected to rise 3.7 percent and Medicare 5 percent in 2016 and 5.9 percent in 2016.
But for 2018 and beyond, spending on both entitlement programs is expected to grow even faster than private insurance spending.
The authors say that growth in using Medicare services will increase from recent historical lows as more baby boomers reach retirement age. In addition, the Medicaid population will become “older, sicker and therefore costlier,” the study said.
Medicaid spending in particular is a focal point in the debate over Obamacare repeal. Republicans have endorsed a plan to turn Medicaid into a state block grant program in which states are given a fixed amount of federal funding.
While such a move would reduce federal spending, critics have said that it would cause states to shoulder more of the burden of providing care for Medicaid patients.
Meanwhile, the estimate gave critical insight in the debate over high drug prices.
Spending on prescription drugs is expected to increase by 6.3 percent every year.
The growth could be influenced by “higher spending on expensive specialty drugs,” the study said.
However, some of that spending could be mitigated by increases in lower-cost generic drugs over the next decade, the report said.
The amount of spending on prescription drugs has increased by 17 percent from $297 billion a year in 2014 to a projected $360 billion this year, according to the study.
