Thursday, October 16, 2014

National Health Expenditure Projections 2013-2023

Major Findings

  • Health spending is projected to grow at an average rate of 5.7 percent for 2013-2023, 1.1percentage points faster than expected average annual growth in the Gross DomesticProduct (GDP).
  • Health spending growth for 2013 is projected to have remained slow at 3.6 percent due tothe modest economic recovery, the impacts of sequestration and continued slow growth in the utilization of Medicare services, and continued increases in cost-sharing requirements for the privately insured.
  • Improving economic conditions, the Affordable Care Act (ACA) coverage expansions, and the aging of the population, drive faster projected growth in health spending in 2014 and beyond.
    • Expected growth for 2014 is 5.6 percent, as 9 million Americans are projected to gain health insurance coverage, predominantly through Medicaid or the Health Insurance Marketplaces.
    • Average annual projected growth of 6.0 percent per year is projected for 2015 through 2023, largely as a result of the continued implementation of the ACA coverage expansions, faster projected economic growth, and the aging of the population. While projected growth is faster compared to recent experience, it is still slower than the growth observed over the longer-term history.
    • The number of uninsured people is expected to decline from 45 million people in 2012 to 23 million people by 2023.
    • By 2023, health expenditures financed by federal, state, and local governments are projected to account for 48 percent of national health spending and to reach a total of $2.5 trillion; in 2012, such expenditures constituted 44 percent of national health spending and $1.2 trillion.
  • Health spending is projected to be 19.3 percent of GDP by 2023, up from 17.2 percent in 2012.
Major Findings by Payer

Medicare

  • Due to a deceleration in growth driven by sequestration and lower utilization across services, Medicare spending growth is projected to have slowed to 3.3 percent in 2013, down from 4.8 percent growth in 2012, and to have totaled $591.2 billion. 
  • Projected Medicare spending growth of 4.2 percent in 2014 reflects both an expected  increase in use and intensity of Medicare services, alongside slow increases in payment rates. For 2015, Medicare growth is projected to slow to 2.7 percent, mostly due to lower payments to Medicare Advantage plans.
  • For 2016 through 2023, projected Medicare spending growth is expected to rebound to 7.3 percent per year due to increased enrollment by the baby boomers, increased utilization of care, and higher payment rates driven by improved economic conditions, which increase growth in the cost of input goods and services used to treat Medicarepatients. These drivers in growth will be partially offset by slow growth in payment updates due to provisions in the Affordable Care Act and sequestration. 

Medicaid

  • Medicaid spending is anticipated to have grown 6.7 percent and to have reached $449.5 billion in 2013, driven by higher payments rates to primary care physicians called for in the Affordable Care Act, as well as actions by states that increased provider reimbursement rates and expanded benefits. 
  • Total Medicaid spending is projected to grow 12.8 percent in 2014 due to increased enrollment of nearly 8 million beneficiaries. Primarily driving the increase in enrollment are states that chose to expand coverage to adults up to 138 percent of the federal poverty level. 
  • As some states are expected to expand their Medicaid programs after 2014, an additional 8.5 million people are expected to enroll in the program by 2016. Medicaid spending is expected to grow by 6.7 percent in 2015, and 8.6 percent in 2016. For 2016 to 2023, Medicaid spending growth is projected to be 6.8 percent per year on average. 
Private Health Insurance

  • Spending for total private health insurance premiums ($947.5 billion) is projected to have grown by 3.3 percent in 2013, or about the same rate of growth as was observed for 2012. Premiums in 2013 are expected to grow slightly faster than benefits (3.0 percent) due to 6.0 percent growth in the net cost of private health insurance, an increase from 0.1 percent growth in 2012.
  • Private health insurance premium growth is projected to reach 6.8 percent in 2014 due to higher per enrollee spending and increased enrollment through Marketplace plans. 
  • Private health insurance spending growth is expected to remain somewhat elevated at 6.9 percent in 2015, primarily due to additional enrollment into health insurance plans. For 2016 through 2023, after the ACA-related enrollment shifts play out, the effects of improved economic conditions are expected to sustain average private health insurance spending growth of 5.4 percent per year.

Out-of-Pocket

  • In 2013, out-of-pocket spending is projected to have grown 3.2 percent, slightly slower than the growth rates in 2011 and 2012, and to have reached $338.6 billion. Relatively slow growth in out-of-pocket spending is due to low growth in utilization, and higher cost-sharing requirements for the insured, which tend to discourage people from using covered services.
  • Out-of-pocket spending growth is projected to decrease by 0.2 percent in 2014 as a result of the Affordable Care Act’s coverage expansions. 
  • While out-of-pocket spending growth is projected to accelerate after 2015, reaching a peak of 5.8 percent in 2020, the out-of-pocket share of health spending is projected to fall from 11.7 percent in 2013 to 9.9 percent by 2023.

Major Findings by Sector

Hospital

  • Total hospital spending is anticipated to have slowed to 4.1 percent in 2013, reaching $918.8 billion, compared with 4.9 percent growth in 2012. This would represent the fourth consecutive year that hospital spending growth has been under 5 percent after averaging 7.2 percent for 2001 through 2009. 
  • In 2014, hospital spending growth is projected to be 4.5 percent, which largely reflects greater use of hospital services associated with the coverage expansions from the Affordable Care Act. 
  • In 2015, hospital spending is projected to increase 5.1 percent due to the continued effects of the ACA insurance expansion combined with the effect of faster economic growth. For 2016 through 2023, continued population aging and the impacts of improved economic conditions are expected to result in projected average annual growth of 6.2 percent.

Physician and Clinical Services

  • Growth in spending on physician and clinical services (583.9 billion) is projected to have decelerated in 2013 to 3.3 percent, after growth of 4.6 percent in 2012 (and would mark the fifth consecutive year this rate would be below 5.0 percent). This trend is related to the slowest growth in physician prices since 2002, which is due in part to the sequester and procedural payment changes in Medicare.
  • In 2014, physician and clinical services spending growth is projected to be 5.9 percent. As many of the newly insured are anticipated to be generally younger, on average, compared to the current Medicaid and private insurance populations, they are expected to devote a relatively larger share of their medical spending to prescription drugs and physician and clinical services than to hospital care. 
  • For 2015, lower payments to Medicare Advantage plans, as well as expiration of temporary payment increases to Medicaid providers, is expected to slow growth to 3.8 percent for physician and clinical services. 
  • For 2016-2023 Medicare spending on physician and clinical services is projected to average 7.1 percent due to more favorable economic conditions and higher enrollment in private health insurance plans. 

Prescription Drugs

  • In 2013, prescription drug spending is projected to have grown 3.3 percent (reaching $272.1 billion), compared to 0.4 percent growth in 2012. The projected acceleration is due to a smaller descending impact on growth from patent expirations (many of which exerted significant downward pressure on growth in 2011 and 2012) and increased utilization of prescription drugs. 
  • Projected prescription drug spending growth is 6.8 percent for 2014, and 6.4 percent in 2015, driven by increases in the use of prescription drugs among people who are newly insured and those who move to more generous insurance plans as a result of the premium and cost-sharing subsidies offered by the Affordable Care Act.
  • Prescription drug spending is projected to average 5.4 percent for 2016 through 2019 and 6.0 percent for 2020-2023. Faster growth is projected for 2020-2023 due to improving economic conditions, an expected rising trend of expensive specialty drugs being purchased through retail channels, and anticipated changing clinical guidelines designed to encourage drug therapies at earlier stages of treatment. 
Major Findings by Sponsor

  • Health care spending sponsored (or financed) by federal, state, and local governments is projected to have grown 3.2 percent (to $1.3 trillion) in 2013. 
  • Reflecting growth trends in private health insurance and out-of-pocket spending, outlays by businesses, households, and other private sources are projected to have risen by 3.9 percent in 2013, compared to 4.6 percent in 2012, and to have reached $1.6 trillion in 2013. 
  • For 2014, health care financing is projected to shift from households towards the federal government due to features of the Affordable Care Act coverage expansions, such as the 100-percent initial federal matching rate for newly eligible Medicaid enrollees, and subsidies for Marketplace coverage. As a result, the federal government’s share of spending is projected to increase to 28 percent in 2014, from 26 percent in 2013.
  • The government-sponsored share of health spending is projected to increase and account for 48 percent of national health expenditures by 2023, largely driven by Medicaid coverage expansions, Marketplace plan premium and cost-sharing subsidies, and an increasing gap between dedicated Medicare financing and program outlays.
Source:  Centers for Medicare and Medicaid Services

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