Health bill to approach 20 percent of spending by 2020

Health bill to approach 20 percent of spending by 2020
By Andrew Seaman
Jul 28, 2011

(Reuters) - The U.S. health bill will account for 19.8 percent of the nation's spending by 2020, up from 17.6 percent in 2009, outpacing projected average annual GDP growth, researchers said on Thursday.

The report, published online in the journal Health Affairs, looked at projected U.S. health spending through 2020 and estimated about 30 million people will gain health insurance by the start of the next decade due to President Barack Obama's healthcare overhaul.

According to the report, the average annual growth in national health spending is expected to be 5.8 percent, or 0.1 percentage point higher than it would be without the Affordable Care Act.

"We are projecting a decline in the out-of-pocket share, but that doesn't mean that the consumer's burden is going to be substantially reduced," said Sean Keehan, an economist at the Centers for Medicare and Medicaid Services (CMS) and co-author of the report. "Especially since we're projecting health spending to grow at a faster rate than economic growth and disposable personal incomes."

For 2010, the researchers estimated that health spending grew at a historically low rate of 3.9 percent over the previous year to $2.6 trillion, which they attributed to a weak economy that has led many consumers to delay medical treatment.

But future spending will likely grow at a faster pace, fueling concerns over how to cut the country's deficit, now the subject of fierce debate among lawmakers ahead of a deadline for raising the government's borrowing limit.

The largest increase in healthcare spending in a single year is expected in 2014, when CMS forecasts a rise of 8.3 percent from 2013 as much of the new U.S. health law is implemented. The law's provisions include introducing state-based insurance exchanges and increased access to the government's Medicaid insurance plan for the poor. Spending growth will then average 6.2 percent annually from 2015 through 2020.

According to the report, some large employers with low-wage employees are expected to stop offering health insurance in 2014. An estimated 13 million employees would then likely seek insurance in the new exchanges or by enrolling in Medicaid, according to Rick Foster, CMS's chief actuary.

Increased access to health insurance is another explanation for the high growth rate, because with access comes demand.

The researchers estimated that doctor visits, clinical services and prescription drugs will be some of the largest growth areas, because of the comparably young age of the newly insured population. The report said younger patients tend to require less acute care.

(Editing by Michele Gershberg and Steve Orlofsky)