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Healthcare costs predicted to soar in next decade

Robin Wulffson MD's picture
Affordable Care Act, healthcare costs, controversy, forecast

Healthcare costs are currently a hot button topic throughout the nation. Opponents and proponents of the Affordable Care Act are anxiously awaiting the Supreme Court decision due to be released this month. On June 11, the trade journal Health Affairs released a forecast from the present through 2021 based on the premise that most of the elements of the Affordable Care Act are implemented. The fate of the law is uncertain.

The Supreme Court could strike down part or all of it this month; furthermore, Republicans, including likely Republican presidential candidate Mitt Romney, have pledged to repeal it. Democrats are of the opinion that the law will be upheld and that they expect to continue to carry it out.

National healthcare spending growth was 3.8% in 2009, the smallest increase on record, and was followed by a similar 3.9% increase in 2010. According to the forecast, US healthcare spending is projected to grow at 4.0%, on average, slightly above that of the past two years. They note that preliminary data suggest that growth in consumers’ use of healthcare services remained slow in 2011, and this pattern is expected to continue this year and next. However, in 2014, health spending growth is expected to accelerate to 7.4% as the major coverage expansions from the Affordable Care Act come into effect. Spending growth would slow again starting in 2015 and average 6.2% each year through 2021. For 2011 through 2021, national healthcare expenditures is projected to grow at an average rate of 5.7% annually, which would be 0.9 percentage point faster than the expected annual increase in the gross domestic product during this period. By 2021, federal, state, and local government healthcare spending is projected to be nearly 50% of national health expenditures, up from 46% in 2011, with federal spending accounting for about two-thirds of the total government share. Soaring government spending on healthcare is expected to be propelled by faster growth in Medicare enrollment, expanded Medicaid coverage, and the introduction of premium and cost-sharing subsidies for health insurance exchange plans.

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The forecasters note that most spending increases projected for 2014 would be due to routine doctors’ visits and prescription drugs; this is because the majority of newly-insured individuals are expected to be young and relatively healthy. They also predicted greater spending on health insurance and government administration if the law takes full effect in 2014.

According to the analysts, the impact of the new healthcare law would be offset by provisions expected to reduce spending on Medicare and on some high-cost health plans. As a result, the Affordable Care Act is predicted to have a small overall impact on total healthcare expenditures. They predict that if the law takes effect, only 0.1 percentage point of the expected annual average growth could be attributed to it; however, that percentage point translate into about $478 billion by 2021.

A more significant reason for projected healthcare spending growth is the aging of baby boomers as they make greater use of Medicare, the federal insurance program for seniors. By 2021, healthcare spending is expected to consume 19.6% of the US economy, at 19.6% of the gross domestic product, up from 17.9%, in 2010. The government share of the spending also would be greater, at nearly 50%, up from 46%, primarily due to the anticipated growth in Medicare enrollment.

Reference: Health Affairs

See also:
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