CMS’ Office of the Actuary released a report this week on 2018-2027 projections of national health expenditures. Health care spending is expected to rise from 17.9% to 19.4% of gross domestic product (GDP), an annual rise of 5.5 %, in the next decade. CMS states that the key drivers for the rise in expenditures will be prices of goods and services and increased Medicare enrollments with baby boomers aging into the program.

Medicare

Annual Medicare spending growth is expected to surpass the spending growth of Medicaid and private health insurance, as baby boomers age in and cost per beneficiary rises. From 2020 to 2027, annual Medicare spending is estimated to increase by 7.6%, up 0.5% from 2019 growth projection.

Medicaid

Medicaid spending growth is projected to increase to 4.8% in 2019 from 2.2% in 2018. The Medicaid expansions in Idaho, Maine, Nebraska, Utah, and Virginia in 2019 are expected to accelerate the increase in spending in the program. From 2020 to 2027, Medicaid is expected to average 6.0% in annual spending growth due to faster per enrollee spending growth. The actuary states that the growth increase is influenced by higher number of aged and disabled enrollees in the program.

Private Insurance

Private health insurance spending growth is expected to increase to 4.8%, slowest among major payers. According to the actuary, the slower growth rate is partly due to baby boomers aging into Medicare and transitioning out of private insurance.

Out-of-pocket spending is projected to grow faster at 4.8% in 2019 than it did in 2017 and 2018, due to repeal of the Affordable Care Act’s individual mandate. From 2020 to 2027, it is expected to grow at 5.0%, representing 9.8% of total spending in 2027.

Prescription Drugs

The spending growth for prescription drugs is expected to increase at an average of 5.6% over the next decade. Prescription drugs had significantly lower spending growth at 0.4% in 2017 and 3.3% in 2018. The projected rise is attributed to increasing efforts to improve medication adherence for beneficiaries with chronic diseases, market entry of expensive new drugs, and changing pharmacotherapy guidelines.

The Actuary states that the projections are based on current law and not on any of the Trump Administration’s proposed regulations.