On the rise: Healthcare spending to equal one-fifth of GDP by 2022

Healthcare spending in the U.S. will grow at an average annual rate of 5.8 percent from 2012 through 2022, which is 1.0 percentage point faster than projected gross domestic product (GDP) growth, according to an article published online ahead of print in Health Affairs.

At that rate, healthcare’s share of GDP by 2022 will rise to 19.9 percent, up from 17.9 percent in 2011.

The projections are based on data from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary, and the article was written by a group of CMS economists and actuaries.

“Annual national health spending growth is projected to remain near 4 percent through 2013, primarily as a result of the recent recession and modest recovery,” wrote lead author Gigi A. Cuckler and colleagues. Beginning in 2014, however, spending growth will accelerate thanks to implementation of provisions of the Affordable Care Act designed to expand coverage.

“By 2022 the Affordable Care Act is projected to reduce the number of uninsured people by thirty million, add approximately 0.1 percentage point to average annual health spending growth over the full projection period, and increase cumulative health spending by $621 billion,” the authors continued.

In addition to the healthcare policy reforms, an improving economy and an aging population will also drive spending increases.

Medicaid and private health insurance spending is estimated to increase 12.2 percent and 7.7 percent, respectively. Projected prescription drug spending is expected to grow at an average annual rate of 6.5 percent for 2015-22; annual growth in physician and clinical services is estimated to be 5.5 percent for 2015-18 and 6.6 percent for 2019-22.

New coverage and reduced cost sharing will cause out-of-pocket spending to decline 1.5 percent in 2014.

The projections in the report incorporate two major changes from previous estimates of healthcare spending. It incorporates the June 2012 U.S. Supreme Court ruling that Medicaid eligibility expansion is optional for the states, and the estimates also presume that scheduled Medicare physician payment rate reduction under the Sustainable Growth Rate formula do not occur.