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Life Health > Health Insurance > Health Insurance

Annual Health Costs Seen Hitting $4.3 Trillion By 2017, Report Finds

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Prescription drug prices will continue to moderate, but growth there and in an “other private health care” category will contribute to another decade of skyrocketing U.S. health expenditures.

Economists and actuaries in the Office of the Actuary at the Centers for Medicare and Medicaid Services are making that prediction in a paper published 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 Sean Keehan, an economist at the CMS national health statistics group, is estimating that overall national health expenditures will increase an average of 6.7% from 2007 to 2017, compared with an average annual increase of 4.7% in U.S. gross domestic product.

The increase, which will amount to 5.8% per year per capita, will push total national health expenditures to $4.3 trillion, or 19.5% of GDP, in 2017, up from $2.2 trillion, or 16.3% of GDP, in 2007, the researchers estimate.

The researchers include a figure for “program administration and net cost of private health insurance”–health insurance premiums minus expenditures on medical claims. Spending in that category will increase about 6.7% per year, the researchers estimate. That category will account for about $298 billion in expenditures, or 7% of national health expenditures, in 2017, up from 6.9% in 2007, the researchers predict.

Average private health insurance payments probably rose 6.4% in 2007, up from 5.5% in 2006, the researchers write.

“A mild cycle of premium growth is expected over the projection period, with acceleration to 6.9% in 2009 followed by a gradual slowdown to 5.9% by 2017,” 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.

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

“Other personal health care” expenditures, a category that includes military health programs, could be the fastest growing major health expenditure category. The CMS researchers are predicting that category will grow 10.3% over the coming decade to account for $183 billion in expenditures in 2017, up from $70 billion in 2007.

The annual increase in prescription drug spending will average about 8.2% per year, down from an average of more than 10% per year in recent years, because of factors such as shifts to insurance plan designs that encourage patients to use generic drugs. 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, drugs will continue to be a major driver of health spending expansion, the CMS researchers predict.

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

Most other categories, such as hospital care and physician services, will grow about 6% to 7% per year, CMS researchers predict.


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