On Wednesday February 20th, the CMS Office of the Actuary released its annual projections of national health expenditures for the next ten years. The report predicts healthcare spending will increase at 5.5 percent over the next decade. Most of this anticipated spending increase is attributed to the Medicare program.

In general, national health expenditure growth is expected to continue at a consistent pace with an expected 5.5 percent annual growth from 2018 until 2027. This translates into nearly $6 trillion by the year 2027. The report also estimates that healthcare’s share in the United States GDP will also increase from 17.9 percent to 19.4 percent by 2027.

Medicare spending will be a particularly important factor in health spending. The report estimates that by the year 2027, state, local, and federal programs are projected to finance 47 percent of total national health spending. Additionally, average annual spending on Medicare is projected to exceed both Medicaid and private insurance, because of the comparatively higher rate of enrollment in Medicare throughout the ten-year period as baby boomers age into Medicare.

Net health insurance enrollment is predicted to stay consistent with an expected change over ten years from 90.9 percent of Americans having insurance to 89.7 percent in 2027.

Medicare has the fastest projected spending growth rate among payers, as it is expected to average 7.4 percent increase in spending from 2018-2027. Medicaid spending is also expected to accelerate its growth rate for the first time since 2014, with a projected growth rate of 5.5 percent from 2018-2027. The report cites Medicaid expansions in Idaho, Maine, Nebraska, Utah, and Virginia as a main factor of accelerated Medicaid spending. The report does not factor the possibility of expansion states choosing to discontinue the Medicaid expansion into its projections.

Spending on private health insurance is expected to slow because of the previous instance of increased Medicare enrollment. Spending on prescription drugs is also projected to generally accelerate because of stricter guidelines and better pharmaceuticals on the market.

Spending on hospital services is projected to increase at an average of 5.6 percent throughout the course of the ten years, largely because of the increased enrollment in Medicare and the expansion of Medicaid in those five states previously stated.

Finally, spending on physician and clinical services is expected to grow 5.4 percent, on average, from 2018 to 2027. A noticeable acceleration in spending is also projected to occur from 2020-2027, due to the demand for health services by the continually aging and continually increasing Medicare population as well as Medicaid expansion in five states. This also means that spending growth on physician and clinical care will be faster than that of private insurance.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA