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Medicare forecasters update expenditure projections

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Officials at the Centers for Medicare & Medicaid Services (CMS) — the federal agency that runs Medicare, Medicaid and the public health insurance exchange system — have updated the National Health Expenditure projections the agency uses for planning its own activities.

The United States spent a total of $3 trillion, or 17.5 percent of gross domestic product, on health care in 2014, the last year for which hard numbers are available, according to Sean Keehan, an economist at the CMS Office of the Actuary, and other economists and actuaries at the Office of the Actuary.

The forecasters estimate overall national expenditures increased 5.5 percent in 2015, to $3.2 trillion, or 17.8 percent of 2015 GDP, and that spending will increase 4.8 percent over 2015 levels this year, to $3.35 trillion, or 18.1 percent of GDP.

They see spending increasing to a total of about $4 trillion, or 18.5 percent of GDP, in 2019, and $5.6 billion, or 20.1 percent of GDP, in 2025.

The forecasters are estimate spending will rise 5.7 percent in 2019 and 6 percent in 2025, in part because of an increase in the average age of the population.

The forecasters published their projections in an article published behind a paywall on the website of Health Affairs, an academic journal that focuses on health care delivery and health care finance systems.  

Increases in health care spending have been smaller in recent years than in the late 1990s and early 2000s.

Related: CMS analysts: Health cost growth falls again

But the government’s share of spending spiked around 2008 and 2009, in part because of the expansion of government health programs related to the response to the “Great Recession.”

Related: CMS: Health spending share of GDP stabilizes

For a look at some more details from the report that might be useful in an insurance agent or broker’s presentation slidedecks, read on:

A hand making a payment

Medicare and Medicaid alone could account for about 47 percent of national health expenditures in 2025, the government forecasters say. (Image: Thinkstock)

1. How government and private payers might split the tab

The forecasters say the federal government’s share of national health expenditures increased to 28 percent of the total in 2014, from 23 percent in 2007, the earliest year shown, and could increase to 30 percent in 2025.

State governments’ share has held steady at about 17 percent and could continue to be 17 percent in 2025.

Private employers’ share has fallen to 20 percent in 2014, from 22 percent in 2007, and could shrink to 18 percent in 2025.

Private households’ share fell to 28 percent, from 30 percent, and could hold steady at 27 percent over the next few years.

Related: U.S. health spending up most since ’07, fueled by PPACA

MeetingGovernment forecasters see the percentage of people with private coverage increasing. (Photo: Thinkstock)

2. What might happen to public and private plan enrollment

The government forecasters lump traditional individual coverage, employer-sponsored coverage and Affordable Care Act public exchange plan coverage together under the heading of “private health insurance” in the new report.

They say private plan enrollment fell to 189.9 million in 2014, from 197.5 million in 2007, but they expect the total to rise to 204.4 million in 2025.

Enrollment in Medicare and Medicaid increased to about 119 million in 2014, from 89 million in 2007, and it could rise again, to 150 million, in 2025.

The number of uninsured people fell to 35.5 million in 2014, from 41.1 million seven years earlier, and could fall further, to 28.4 million, in 2025.

Related: 3 new facts about private U.S. health spending


Government forecasters define the “net cost of insurance” as the amount of cash insurers have left over after paying enrollees’ medical bills. (Image: Thinkstock)

3. What insurers might get

The government forecasters look at health insurers in terms of the “net cost of insurance,” or what health insurers have left over after paying medical bills.

That figure rose to $194.6 billion in 2014, from $143.5 billion in 2007, and it could increase to $382.6 billion in 2025.

That figure grew 12.4 percent in 2014, in part because of the effects of the Affordable Care Act on enrollment, and it might have grown 7.8 percent in 2015, forecasters say.

The forecasters think the net cost of insurance will rise 7.8 percent this year and 6.4 percent in 2025.

Related: CMS actuaries: Health premiums might be 6.4% higher


Government forecasters expect the reimbursement increase gap between doctors and drug companies to narrow. (Photo: Thinkstock)

4. What doctors might get

Congress has been trying to hold down growth in Medicare physician reimbursement rates, but overall spending on physicians increased to $603.7 billion in 2014, from $458.7 billion seven years earlier.

Spending on physicians is likely to total about $665 billion this year, and it could increase to $1.1 trillion in 2025.

Related: Feds shift Medicaid costs to states 

DNA test results

Government forecasters say health research support might increase, a little. (Image: Thinkstock)

5. What medical research funding could look like

The forecasters believe spending on medical research was $45.5 billion in 2014. That was up from $42.6 billion in 2007, but down from $46.5 billion in 2013.

Research spending might have increased 1.4 percent in 2015, and it might increase 2.6 percent this year, the forecasters say.

They say spending might rise 4.9 percent in 2025.


Some projected net health insurance costs go poof

CMS: Medical research spending may be rising

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