Growth in U.S. healthcare spending spurred by baby boomers

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Public health spending growth is expected to gradually increase by 2017, as the leading edge of the baby boom generation begins to enroll in Medicare, according to a study issued this week by the Centers for Medicare & Medicaid Services (CMS) and published in Health Affairs.

National health spending is expected to grow 6.7 percent in 2007 and reach $2.2 trillion. Between 2007 and 2017, growth is anticipated to remain steady at around 6.7 percent per year, yielding an estimated $4.3 trillion in health spending in 2017.

Slower growth in private spending toward the end of the period is expected to be offset by stronger growth in public spending. The health share of gross domestic product (GDP) is expected to increase to 16.3 percent in 2007 and then rise throughout the projection period, reaching 19.5 percent of GDP by 2017 -- --nearly one-fifth of the economy.

For health spending through public programs, growth is anticipated to decelerate to 6.8 percent in 2008 after the 8.2 percent growth in 2006 that was largely influenced by the implementation of the Medicare Part D benefit.

Growth in private health expenditures is expected to rebound to 6.3 percent in 2007 following the somewhat slow growth of 5.4 percent in 2006 that was related to the implementation of Medicare Part D.

“With the implementation of Medicare Part D behind us, a focal point of the next ten years will be the impending movement of the baby boomers into Medicare,” the study authors concluded. “Expected trends later in the projection period, such as accelerating growth in Medicare enrollment, are a first sign of this shift.”

The authors added that although the difference in rates between health spending growth and overall economic growth is projected to be lower over the next decade than the previous thirty years, on average, cost pressures continue to mount.

“As a result, health is projected to consume an expanding share of the economy, which means that policymakers, insurers and the public will face increasingly difficult decisions about the way healthcare is delivered and paid for,” the authors wrote.