Health Care Spending Growth Projected to Rise to 19.4% of GDP in Next Decade

According to a report in Health Affairs and information from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary, national health expenditures are projected to grow at an average annual rate of 5.5% for 2018 to 2027 and represent 19.4% of gross domestic product (GDP) in 2027.

CMS predicts health care’s share of GDP will rise from 17.9% in 2017 to 19.4% in 2027. This projection nearly matches the 19.7% the CMS actuary predicted in its national health expenditure in 2018.

The report also explained that prices for health care goods and services are projected to grow
2.5 % per year, on average, for 2018 to 2027—faster than the average price growth experienced over the last decade—and will account for nearly half of projected personal health care spending growth.

The authors of the report explained that prices for outpatient prescription drugs will increase 2.8%, a similar 2.6% for hospitals, and 1.8% for physicians. An increase in utilization and intensity of service will account for a third of spending growth.  

Among the major payers, average annual spending growth in Medicare (7.4%) is expected to exceed that in Medicaid (5.5%) and private health insurance (4.8%) over the projection period, mostly as a result of comparatively higher projected enrollment growth. These rates can be attributed to the rise in aging baby boomer enrollment, reaching its peak of covered individuals this year.

The insured share of the population is expected to remain stable at around 90% throughout the period, as net gains in health coverage from all sources are projected to keep pace with population growth. —Edan Stanley