Healthcare spending expected to outpace the GDP over the next decade

The expected growth in healthcare expenditures from 2017 to 2026 is expected to outpace the growth in gross domestic product (GDP) by 1%, resulting in an increase in the health share of the GDP from 17.9% in 2016 to 19.7% in 2026, according to a CMS report.

The report estimates national health expenditure growth to average 5.5% annually during this time. Comparatively, health expenditures grew at 4.3% in 2016 and are projected to have increased to 4.6% in 2017. This growth is attributed to an increase in prices for healthcare goods and services as well as accelerated Medicare spending and increases in insurance premiums for coverage purchased through the Healthcare Marketplace.

Future health spending and enrollment will likely be driven by disposable personal income trends, price increases for medical goods and services, and a shift toward Medicare enrollment as baby boomers become eligible for Medicare. Medicare is expected to experience the largest growth of all payers from 2017 to 2026 at 7.4% annually, mainly due to an increased rate of Medicare enrollment over the next decade. Comparatively, Medicaid growth is estimated at 5.8% annually, which is slower than the 8.3% rate experienced during the expansion of the Affordable Care Act and private health insurance growth is estimated at the slowest annual rate (4.7%).

The report estimates that total healthcare spending is expected to rise by 5.3% in 2018, partly due to growth in personal healthcare prices, which are expected to increase by 1.4% in 2017 and 2.2% in 2018. Prescription drug spending is expected to rise faster than other major healthcare sectors at an average growth rate of 6.3% from now until 2026, largely due to a projected rapid increase in the price of prescription drugs.

In light of the rate at which healthcare spending is expected to grow over the next decade, CMS Administrator Seema Verma called for CMS to increase market competition and consumer choice in an effort to curb costs to ensure the future viability of CMS programs.