CMS Report Shows Increased Health Care Spending Over Next Decade

National health expenditures are expected to rise to nearly 20% of the gross domestic product by 2028, according to new estimates released by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS).

Spending growth is estimated to grow by 5.4% year-over-year from 2019 to 2028, explained Sean Keehan, an economist in CMS’ Office of the Actuary, Baltimore, MD, and colleagues in a Health Affairs article.

Much of the anticipated spending growth is attributed to expected increased costs of medical goods and services, as measured by the Personal Health Care Price Index—estimated at 2.4% increase per year.

“This acceleration in price growth,” explained Mr Keehan and colleagues, “largely reflects faster expected growth in health-sector wages and follows the unusually slow rate of personal health care inflation observed in 2014 to 2018, when price growth for medical goods and services was 1.2% and represented 25% of expenditure growth.”

The Actuary’s report also estimated that Medicare will be a substantial contributor to overall spending increases with the fastest spending growth, more than 7% per year, due to its higher projected enrollment rates.

“The government is projected to pay a larger share (nearly half) of the nation’s total health bill by 2028, as the baby boomers continue aging into Medicare and the program’s beneficiaries consume $1 out of every $4 spent on health care,” explained Mr Keehan and colleagues.

Medicaid and private insurance are expected to raise 5.5% and 4.8, respectively, year-over-year.

“These enrollment projections reflect an expectation that the recent trend of the working-age population enrolling in private health insurance plans (primarily employer-sponsored insurance plans) at lower rates will continue,” explained Mr Keehan and colleagues, “And as a result the insured share of the population is expected to decline modestly, from 90.6% in 2018 to 89.4% in 2028.”

In a Health Affairs blog, Mr Keehan concluded, “Policymakers and other stakeholders will undoubtedly continue to monitor these trends and their implications for the health sector, federal and state budgets, and the economy as a whole.” 

[Editorial Note from Health Affairs: These projections are constructed using a current-law framework and do not assume potential legislative changes, nor do they reflect the highly uncertain impacts of the COVID-19 pandemic over the projection period.]  —Edan Stanley