Health Spending to Reach Nearly 20% of GDP in 2025

The Centers for Medicare and Medicaid Services (CMS) forecast through 2025 predicts that health-care expenditures will become an ever-larger part of the economy.

The CMS has released its projections for U.S. National Health Expenditures (NHE). According to the report, national health spending is forecasted to grow at an average annual rate of 5.6% between 2016 and 2025.

The forecast uses data from the last year for which statistics are available (2015) to predict what will happen in the following decade. Because the forecast uses current laws, it does not take into account any potential changes to the Affordable Care Act (ACA) or any other healthcare reforms that may be passed in the coming months and years. This means that these forecasts will have to be altered, but they provide a rough estimate of what can be expected.

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Overall, the NHE is expected to grow faster than gross domestic product (GDP), meaning that the health share of the GDP is expected to rise from 17.8% in 2016 to 19.9% by 2025. The insured population is also projected to increase from 90.9% to 91.5% in that same period.

An ageing baby-boomer population will mean more Medicaid enrollment growth, as well as ongoing subsidies for lower-income Marketplace plan enrollees, and will result in health spending by federal, state, and local governments outpacing spending in the private sector. Government spending is expected to be $1.5 trillion in 2016, while the private sector is forecasted to be $1.8 trillion.

The report breaks this forecast down even further into sector categories. Hospital growth is expected to grow at an annual rate of 5.5%, faster than 2010-15 partly because of a forecasted increase in the use of hospitals by Medicare beneficiaries. Physician and clinical services are projected to grow slightly in 2016 to 6.6% because of an acceleration in prices, but those services are expected to slow to 5.9% in 2017 in response to coverage expansions.

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Perhaps most interesting for pharmacists are the prescription drugs numbers.

In 2016, the report projects a decrease in growth in prescription drug spending from 9% per year in 2015 to 5% per year, partly because of a reduced use in newly approved specialty drugs, and because several important drugs will lose patent protection. However, the report forecasts an uptick in this growth in 2018 up to 7.6%, as fewer drugs will lose patent protection. All told, prescription drug spending is forecasted to increase at a rate of 6.3% per year between 2016-2025.

You can read the whole report here.