Health spending growth through 2013 is expected to remain slow because of the sluggish economic recovery, continued increases in cost-sharing requirements for the privately insured, and slow growth for public programs. These factors lead to projected growth rates of near 4 percent through 2013. However, improving economic conditions, combined with the coverage expansions in the Affordable Care Act and the aging of the population, drive faster projected growth in health spending in 2014 and beyond. Expected growth for 2014 is 6.1 percent, with an average projected growth of 6.2 percent per year thereafter. Over the 2012–22 period, national health spending is projected to grow at an average annual rate of 5.8 percent. By 2022 health spending financed by federal, state, and local governments is projected to account for 49 percent of national health spending and to reach a total of $2.4 trillion.
Annual national health spending growth is projected to remain near 4 percent through 2013, primarily as a result of the recent recession and modest recovery. This projection is consistent with the historical relationship between health spending and economic cycles.
In 2014 the implementation of provisions of the Affordable Care Act related to major coverage expansions is expected to accelerate health spending growth to 6.1 percent. Through the remainder of the projection period discussed in this article, this rate of growth is sustained as a result of improved economic conditions and an aging population’s increased demand for health care.
By 2022 the Affordable Care Act is projected to reduce the number of uninsured people by thirty million, add approximately 0.1 percentage point to average annual health spending growth over the full projection period, and increase cumulative health spending by $621 billion.
This article explores the factors influencing overall projected health spending trends through 2022 by major health industry sectors, payers, and sponsors. A summary of the underlying methods is also included. Notably, these estimates incorporate two substantial changes from prior projections. First, the estimates incorporate the June 2012 US Supreme Court ruling that made the Medicaid eligibility expansion under health reform optional for states.1 Second, unless otherwise stated, the estimates focus on an outlook for spending in which the scheduled Medicare physician payment rate updates under the Sustainable Growth Rate formula do not occur, including a 24.7 percent reduction as of January 1, 2014.
Date: September 13, 2013