A new US government analysis estimates that the country’s spending on national health will continue to grow steadily and reach nearly 20 per cent of gross domestic product (GDP) by 2017, outpacing economic growth and inflation. GDP is the total value of all goods and services a country produces.

The new analysis was prepared by the Office of the Actuary in the Centers for Medicare and Medicaid Services (CMS) and is published online in the journal Health Affairs. It is also available on the CMS website.

CMS Acting Administrator Kerry Weems, said:

“The cost of health care continues to be a real and pressing concern.”

It’s not just about the quantity, but the quality as well, said Kerry:

“Making sure we are paying for high quality health care services, not just the number of services provided, is just one of the most critical issues facing the American public and the federal government now and in the future.”

The report estimates that growth in US health care spending was 6.7 per cent in 2007 and will remain steady at that rate for the next decade. At this rate, it will grow more rapidly than estimated growth in the general economy (4.9 per cent) and general inflation (2.4 per cent) over the same period.

In 2006, the last year for which full actual figures were included in the analysis, US spending on healthcare was 16.0 per cent of GDP. The CMS estimates this to be 16.3 per cent for 2007 and will grow over the next 10 years to reach a total of over 4.3 trillion dollars, or 19.5 per cent of GDP in 2017.

This overall figure breaks down into many areas of detail, each moving at a different rate. For example:

  • Growth in public health spending, due to the implementation of Medicare Part D, is expected to slow down from 8.2 per cent a year in 2006 to 6.8 per cent in 2008.

  • Public health spending growth is then expected to rise again, gradually, toward 2017 as the baby boom generation starts to claim Medicare.

  • Between now and 2017, growth in health spending is estimated to outpace GDP growth by an average of 1.9 per cent a year.

  • This is smaller than the average 2.7 per cent difference over the last 30 years.

  • Growth in private health spending, including out of pocket and private insurance, is expected to climb back up to 6.3 per cent a year in 2007, following a dip to 5.4 per cent in 2006, also thought to be due to Medicare Part D.

  • This is then expected to peak at 6.6 per cent in 2009, then decelerate to 2017, as the economy slows down in the latter part of the projection period.

  • Spending on prescription drugs is expected to slow down from 8.5 per cent in 2006 to 6.7 per cent a year in 2007, mostly reflecting the slower growth in drug prices.

  • After that, to 2017, it is expected to accelerate, partly because the growth in dispensing rate for generics will level off, and treatments will increasingly call for earlier drug interventions.

  • Medicare Part D is unlikely to affect total national health expenditure growth over the period to 2017 since the per head figure for those on Medicare will be the same as that of those who are not on the program.

Medicare Part D, a program to subsidize prescription drugs for people on the US government’s Medicare insurance program for the over 65s and others, came into effect in January 2006.

Kerry urged:

“This projection of health care spending reminds us that we need to accelerate our efforts to improve our health care delivery system to make sure that Medicare and Medicaid are sustainable for future generations of beneficiaries and taxpayers.”

The full report tracks health spending by source of funds, including private and public (Medicare, Medicaid), and type of service (hospital, doctors, prescriptions, and so on). The latest estimates start after 2006 and project through to 2017.

Click here for the full CMS report.

Sources: CMS Press Release.

Written by: Catharine Paddock, PhD