Experts: Spending on health care to rise

Slow growth trend to be disrupted

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WASHINGTON — Government experts on Wednesday predicted a rebound in national health care spending, after four years of exceptionally slow growth, because of expansions in coverage and improvements in the economy.

The combined effects of the Affordable Care Act, faster economic growth and the aging of the population will fuel the growth of health spending this year and in the coming decade, according to a report by a team of nonpartisan economists and actuaries at the federal Centers for Medicare and Medicaid Services.

“The period in which health care has accounted for a stable share of economic output is projected to end in 2014, primarily because of the coverage expansions of the Affordable Care Act,” said the report, by Andrea M. Sisko and colleagues at the federal health care agency.

Still, they said, even as millions of people gain coverage, the average annual rate of increase in health spending through 2023 will be somewhat lower than it was in the two decades before the recession that began in 2007.

The expected increases will be somewhat dampened by slower growth in Medicare payment rates required by the new health care law and by a trend toward higher co-payments and deductibles, which could inhibit health care use by many people with private insurance. In addition, they said, a new excise tax on high-cost employer-sponsored health plans, starting in 2018, “is expected to slightly constrain premium growth.”

In their annual projections of health spending, the experts predicted that the total would climb 5.6 percent this year and then an average of 6 percent a year until 2023, when health care will account for 19.3 percent of the nation’s total economic output, or 2 percentage points more than last year.

By 2023, the report said, national health spending will total $5.2 trillion annually, up from $2.9 trillion in 2013. The federal share of all health spending will increase, and the share paid by state and local governments will remain constant, while the shares paid by households and private businesses will decline a bit, said the report, published online Wednesday in the journal Health Affairs.

The report estimates that 9 million uninsured Americans are gaining coverage through Medicaid and private insurance this year. That is somewhat lower than estimates by administration officials and the Congressional Budget Office, which said in April that the number of uninsured would decline this year by 12 million.

From 2013 to 2015, the new report says, federal spending on Medicaid will increase 27 percent to $323 billion, from $254 billion. In those years, it said, Medicaid spending by state and local governments will rise 12 percent, to $218 billion, from $195 billion.

The federal government will initially pay all the costs resulting from the expansion of Medicaid eligibility in states that choose to cover certain childless adults with low incomes. States will have to pay some of the cost for new beneficiaries who could have qualified for Medicaid under old eligibility rules.

“Additionally,” the report said, “some large employers of low-wage employees will elect to no longer offer health insurance to their employees by 2016. As a result, a portion of these affected employees will qualify for, and enroll in, Medicaid.”

The experts also estimated that spending on prescription drugs will increase at a rapid clip, rising 6.8 percent this year and 6.4 percent next year.


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