CMS Office of the Actuary on Health Expenditure Projections

By Clive Riddle, July 15, 2015

Where are US health care cost increases headed? The CMS Office of the Actuary tells us to expect 5.8 percent annual increases during 2015-2025, in their report: National Health Expenditure Projections 2015-2025.

The Office of the Actuary states “health spending is projected to grow 1.3 percentage points faster than Gross Domestic Product (GDP) per year over 2015-2025; as a result, the health share of GDP is expected to rise from 17.5 percent in 2014 to 20.1 percent by 2025. Federal, state and local governments are projected to finance 47 percent of national health spending (up from 45 percent in 2014).”

The report findings include:

• National health spending growth is estimated to have been 5.5 percent in 2015.
• By 2016, slower growth in health spending of 4.8 percent is projected as the enrollment in Medicaid and Marketplace plans slows and the associated declines in the number of the uninsured decreases.
• Total annual health care spending growth is expected to average 5.8 percent over 2015-2025.
• In 2015, medical price inflation slowed to 0.8 percent, down from 1.4 percent in 2014. Hospital prices increased by 0.9 percent while price growth in physician services fell by 1.1 percent.
• The share of health expenses that Americans pay out-of-pocket is projected to decline from 10.9 percent in 2014 to 9.9 percent in 2025.
• The insured share of the population is expected to continue to rise from 89 percent in 2014 to 92 percent by 2025.
• Private health insurance expenditures are estimated to have increased by 5.1 percent from 2014 to 2015, reaching $1.0 trillion and will grow 5.4 percent thereafter to 2025.
• Medicaid spending growth is slowing significantly in 2016, to 5.3 percent, which the report attributes to slower enrollment growth and stronger utilization management.
• Medicaid spending growth is expected to average 5.6 percent for 2017-19, lower than in 2014-15.
• In 2015, Medicare expenditures are expected to have been $647.3 billion, a 4.6-percent increase from 2014, driven partly by increased enrollment.
• Medicare per-enrollee costs are estimated to have increased by only 2.4 percent, the same as the previous year, continuing the recent trend of low per-enrollee cost increases.
• Prescription drug spending is projected to grow an average of 6.7 percent per year for 2016 through 2025. This follows growth of 12.2 percent in 2014 and 8.1 percent in 2015