The report from actuaries at the Centers for Medicare and Medicaid Services is likely to add to the pressures making health care a significant issue in the 2020 election. Health care’s share of the economy is projected to climb to 19.4% by 2027 from 17.9% in 2017, assuming no legislative changes to the U.S. health system.
The faster rate of growth would follow a slower tempo seen in 2017, when increases decelerated to a pace not seen since just after the 2007-09 recession.
“While Medicare spending is expected to accelerate the fastest among payers and contribute to the increase, growth in health prices and disposable personal income are also significant contributors,” said Andrea Sisko, an economist at CMS and lead author of the study published in the journal Health Affairs.
Spending is likely to grow because of new drugs on the market, more seniors who will need hospital care, and an expanded Medicaid population that will drive demand for clinical services and doctors. Looking ahead, growth in personal health-care spending is projected to average 5.5% a year, with average growth in prices accounting for nearly half of this growth.
Prescription-drug spending is projected to have grown 3.3% in 2018, compared with 0.4% in 2017, partly because of an increase in the number of new drugs on the market, according to the report. Medicaid expenditures are likely to rise this year because of expansion in Medicaid coverage in Idaho, Maine, Nebraska, Utah and Virginia.
National health spending is projected to have grown 4.4% in 2018, accelerating from 3.9% in 2017, to reach $3.6 trillion. The average annual rate of growth in national health spending is expected to be 5.5% between 2018 and 2027, outpacing average projected growth in gross domestic product by 0.8 percentage point.
Medicare spending growth is projected to average 7.4% in 2018-27, the fastest rate among the major payers, which typically include the federal government, private insurance, state governments and employers.
The insured share of the population is expected to remain stable at around 90% through 2027.