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 CMS Says Aging Boomers a Big Factor in Health Spending Forecast

The Centers for Medicare & Medicaid Services (CMS) released its 10-year outlook for national health spending and enrollment and determined that a major driver of the faster rate of spending will be shifts in enrollment from private health insurance to Medicare caused by the aging baby boomers reaching Medicare eligibility.

The long term and post-acute care profession is tracking this same demographic change for possible growth in its resident volumes in the coming years.

The CMS projections from the agency’s Office of Actuary cover the years 2017 to 2026 and show that national health expenditure growth is expected to average 5.5 percent annually over that time frame and reach $5.7 trillion by 2026. This growth rate would be higher than the projected increase in Gross Domestic Product (GDP) by 1.0 percentage point over 2017-2026, pushing health spending’s share of GDP from 17.9 percent in 2016 to 19.7 percent by 2026, CMS said. 
The report also found that by 2026, federal, state, and local governments are projected to finance 47 percent of national health spending, up from 45 percent in 2016. 

CMS, as well as research published by Health Affairs, included other estimates on the national health spending landscape:

In 2017, the national health spend growth was projected at 4.6 percent in 2017, which is slightly higher than the 4.3 percent growth experienced in 2016. Last year’s increase, CMS said, resulted from “accelerating growth in Medicare spending, slightly faster growth in prices for health care goods and services, and increases in premiums for insurance purchased through the ACA [Affordable Care Act] marketplaces.”

For this year, total health spending is projected to grow by 5.3 percent, driven in part by  higher personal health care prices, which is projected to rise to 2.2 percent in 2018 from 1.4 percent in 2017. CMS said this reflects, in part, faster projected prescription drug price growth as the dollar value of drugs losing patents in 2018 is smaller than in prior years. 

The average 5.5 percent growth in national health spending for 2019-2020 focused on more Medicare spending from more people reaching Medicare eligibility age. In the years 2021-2026, average national health spending growth is estimated to increase by an average of 5.7 percent, or 0.2 percentage point faster compared to average growth in 2019-2020. “During this time frame, Medicare spending growth is projected to continue to outpace growth in private health insurance spending, mostly due to enrollment growth (as baby boomers continue to age out of private insurance and into the Medicare program),” CMS said.

The data show that among the major payers for health care over the 2017-2026 period, Medicare is expected to see the most rapid annual growth at 7.4 percent, propelled by enrollment gains and higher utilization from recent near-historically low rates. On the other hand, Medicaid is projected to average 5.8 percent annual growth over 2017-2026, “which is slower than the average observed for 2014-2016 of 8.3 percent, when the major impacts from the ACA’s expansion took place,” CMS said. 

In the Health Affairs report, researchers said another key contributor to faster health spending growth over the next decade is the trend in prices for medical goods and services, which is projected to increase gradually from historically low rates in 2014-16 (1.1 percent per year) and average 2.5 percent per year in 2017-26. 

“Medical-specific factors—including projected growth in input prices for the goods and services required to provide health care—contribute to this trend, as do expected increases in economywide prices,” the study said. “However, for medical goods and services, the rate of price growth is projected to remain lower over the projection period than the 3.3 percent average annual growth rate in 1990–2007.”

The report said prescription drugs lead the pack as driving prices higher for medical goods and services, with estimates putting the average annual spending growth in 2017-26 at 6.3 percent per year.
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