U.S. healthcare spending growth to slow further - gov't report

by Reuters
Wednesday, 3 September 2014 20:59 GMT

By David Lawder

WASHINGTON, Sept 3 (Reuters) - U.S. healthcare spending is expected to grow more slowly in the coming decade as a sluggish economic recovery and higher cost sharing in private insurance plans limit demand for services, a government report released on Wednesday said.

The Centers for Medicare and Medicaid said it expects average annual healthcare spending to grow by 5.7 percent from 2013 to 2023, compared to 5.8 percent in last year's projections, which covered the years 2012 to 2022.

The projected growth rate is well below the 7.2 percent annual average between 1990 and 2008, CMS said.

The projections coincide with Congressional Budget Office estimates released last week that show another $11 billion reduction in projected spending for Medicare, the federal healthcare program for the elderly, for the 2015-24 period. This reduction from projections made in February contributes directly to lower federal deficits.

The CMS study projects both public and private healthcare outlays and showed the overall total will make up a smaller portion of the economy than previously thought in coming years. In 2023, it estimated that healthcare spending will equal 19.3 percent of Gross Domestic Product, compared with last year's projection of 19.9 percent for 2022. It made up 17.2 percent of GDP in 2012.

The spending growth rate for 2013 will be 3.6 percent, nearly at the historic low since CMS started tracking health care spending in 1960.

For 2014, the spending growth will accelerate to 5.6 percent as more people gain healthcare coverage under President Barack Obama's health insurance reform law, largely through its expansion of Medicaid, and because of an increase in economic growth. But this will still be below last year's estimate of 6.1 percent growth for 2014.

"The major factor is the relationship between health spending and economic growth," said Andrea Sisko, an economist in the CMS actuarial division.

Loss of jobs and associated healthcare benefits tend to discourage healthcare utilization, she said, adding that employment has been slow to recover. Another deterrent has been the increase in healthcare plans that require beneficiaries to bear a greater proportion of costs for doctor visits, procedures and prescription drugs.

Medicare reimbursement rates also have been curtailed by the "sequester" budget cuts and by the Affordable Care Act, and prescription drug costs have eased because patents on a number of major medications have expired in recent years, making cheaper generic versions available.

But as the economy improves and more Baby Boomers retire and draw benefits, spending growth is still expected to pick up, averaging 6.0 percent from 2015-23, CMS said. (Reporting by David Lawder; Editing by Bernard Orr)

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