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Life Health > Health Insurance > Health Insurance

Study Sees $4 Trillion Tab For Health Care By 2016

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Increases in spending on prescription drugs are slowing, but they are still growing fast enough to contribute heavily to a 6.9% average annual growth in U.S. health expenditures over the coming decade that will bring total spending in 2016 to over $4 trillion, government researchers predict.

The researchers, economists and actuaries in the Office of the Actuary at the Centers for Medicare and Medicaid Services, published their latest national health expenditure forecast in the Web edition of Health Affairs, a scientific journal that focuses on the delivery and financing of health care.

The research team, led by John Poisal, deputy director at the CMS National Health Statistics Group, is estimating that overall national health expenditures will increase an average of 6.9% from 2006 to 2016, compared with an average annual increase of 4.9% in U.S. gross domestic product.

The increase, which will amount to 6.1% per year per capita, will push total national health expenditures to $4.1 trillion, or 19.6% of GDP, in 2016, up from $2.1 trillion, or 16% of GDP, in 2006, the researchers estimate.

The “net cost of private health insurance”–health insurance premiums minus expenditures on medical claims–falls into a category that also includes health program administration. Spending in that category will increase about 6.8% per year, the CMS researchers estimate. That category will account for about $296 billion in expenditures, or 7.1% of national health expenditures, in 2016, down from 7.4% in 2006, the researchers predict.

The spread of high-deductible health plans could help hold down the health expenditure growth rate, the researchers write.

The effects of the traditional “underwriting cycle” on growth in net health insurance costs may be milder than in the past because private health insurers now appear to have the ability to obtain and analyze trend data more quickly and adjust premiums accordingly, the researchers write.

In general, as the population ages, “private health spending is expected to slow in response to slowing projected income growth,” the researchers write.

Most growth in health expenditures will come from Medicare and Medicaid, the researchers add.

CMS researchers expect average annual spending increases to be less than 6% in the expenditure categories for nondurable medical products, durable medical equipment, nursing home care, dental services and research.

Spending in most other categories, such as hospital care and physician services, will grow about 6% to 7.5% per year, CMS researchers predict.

The highest growth rate, 9.7%, may occur in the “other personal health care” category, which includes military health spending. If the CMS researchers’ forecast is correct, that category will account for $159 billion in expenditures, or 3.8% of overall national health expenditures, in 2016, up from 2.9% in 2006.

The CMS researchers expect prescription drug spending to account for about $497 billion in expenditures, or 12% of national health expenditures, in 2016, up from 10% in 2006.

The average annual increase in prescription drug spending will fall to about 8.6% per year, from an average of about 14% per year in recent years, because of factors such as shifts to insurance plan designs that encourage patients to use cheaper drugs, the researchers write.

But because prescription drug spending is a big category, and the spending growth rate will continue to be faster than the overall national health expenditure growth rate, prescription drug spending will continue to be a major driver of health spending expansion, the CMS researchers predict.


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