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National Health Spending to Increase Drastically in 2014


A new report by members of CMS' Office of the Actuary projects that U.S. health spending will rise at an average rate of 5.8% over the next decade, reaching nearly $4.54 trillion by 2020.

Over the next decade, spending health spending in the U.S. is expected gradually grow from 2011 to 2013 before greatly accelerating when major coverage expansions from the Affordable Care Act begin in 2014.

A report in Health Affairs, expects overall growth of 5.8% through 2020, which would be 1.1 percentage points faster than the expected annual growth of the gross domestic product.

In 2010, health spending grew at a historic low of 3.9% — the previous historic low being 4% growth in 2009 — but 2011 to 2013 is expected to grow more rapidly at 4.9% as the recession gets further behind and the economy experiences an expansion.

When the Affordable Care Act expands access to insurance coverage in 2014, an estimated 22.9 million people will join the ranks of the insured. And while national health spending is expected to grow 8.3% that year — compared to 5.5% the year before — out-of-pocket spending will decline by 1.3%. Many services that people formerly paid for out of pocket will be covered by insurance as coverage expands in 2014.

For the three largest sectors — hospital services, physician and clinical services, and prescription drugs — total spending is projected to be higher in 2014. However, hospital services should have a lower growth rate than the other two.

“Insurance expansions can typically lead to more efficient use of health care services (that is, more preventive care), which would increase office visits and prescription drugs, and could lead to less reliance on hospital care,” according to the report.

The growth in 2014 is likely to be the peak for health spending. From 2015 to 2020, the report expects growth in private health insurance premiums to slow as employers of low-wage workers stop offering health coverage and instead choose to pay the penalty mandated by the Affordable Care Act.

By 2020 the projected share of national health spending accounted for by hospital services will be 30%, which is lower than it would have been in the absence of the Affordable Care Act. Meanwhile physician services and prescription drugs will be higher than they would have without the act at 19% and 11%, respectively.

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