Health Spending Growth Projected to Average 5.7% Annually Through 2021

By SHRM Online staff Jun 20, 2012

Aggregate health care spending in the U.S. will grow at an average annual rate of 5.7 percent for 2011 through 2021, or 0.9 percentage point faster than the expected growth in the gross domestic product (GDP), according to new estimates from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). The estimates are in a study published online in June 2012 by the journal Health Affairs, "National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands and Economic Growth Accelerates."

For 2011-13, U.S. health spending is projected to grow at 4 percent on average—slightly above the historically low growth rate of 3.8 percent in 2009. Preliminary CMS data suggest that growth in consumers’ use of health services remained slow in 2011, and this pattern is expected to continue into 2013.

However, in 2014, health spending growth is expected to accelerate to 7.4 percent as the major coverage expansions from the Patient Protection and Affordable Care Act (PPACA) begin, assuming that the PPACA is not overturned by the U.S. Supreme Court or repealed by Congress.

The health care share of GDP by 2021 is projected to rise to 19.6 percent from its 2010 level of 17.9 percent. In addition, by 2021, federal, state and local government health care spending is projected to be nearly 50 percent of national health expenditures, up from 46 percent in 2011, with federal spending accounting for about two-thirds of the total government share.

Rising government spending on health care is expected to be driven by faster growth in Medicare enrollment, expanded Medicaid coverage and the introduction of premium and cost-sharing subsidies for health insurance exchange plans.

The study, which was to be published in Health Affairs' July 2012 issue, provides an analysis of how Americans are likely to spend their health care dollars in the coming decade, with projections for spending by different sectors, payers and sponsors.

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