U.S. health spending projected to reach $4.6 trillion by 2019

by Olga Deshchenko, DOTmed News Reporter | September 14, 2010
CMS economists analyze
health care costs
post health care reform
U.S. health spending is projected to reach nearly $4.6 trillion by 2019, growing an average annual rate of 6.3 percent in the next 10 years, according to a new analysis by economists at the Centers for Medicare and Medicaid Services.

The paper, published last week in the online issue of Health Affairs, is the first federal government report on national spending post-health care reform.

In 2010, CMS economists project health care spending reached $2.6 trillion, accounting for 17.5 percent of GDP. This growth "is driven in large part by the postponement of cuts to Medicare physician payments and legislative changes to COBRA premium subsidies," according to the report.

By 2019, nearly one of every five U.S. dollars spent, or about 19.6 percent of the gross domestic product, will go toward health care. This projection is 0.3 percentage points higher than anticipated before reform.

"In the aggregate, it appears that the Affordable Care Act will have a moderate effect on health spending growth rates and the health care share of the economy," said Andrea Sisko, lead author of the study and economist at CMS, in prepared remarks.

Health spending is projected to increase by 9.2 percent in 2014, when coverage will be expanded to millions of uninsured Americans. CMS estimates that nearly 93 percent of people will be insured by 2019, with more than half of the newly insured gaining coverage through Medicaid.

The expansion of the health care system will also increase administrative spending, which is expected to cost $2.4 billion from 2010 through 2019. The federal and state entities that will be formed to operate the Health Insurance Exchanges are projected to cost $37.7 billion. Medicaid administration costs are also expected to increase by $31 billion.

"In this analysis, we have shown that the net impacts of key Affordable Care Act and other legislative provisions on total national health expenditures are moderate, but the underlying effects on payer spending levels and growth rates are much more pronounced and reflect the Affordable Care Act's many substantive changes to health care coverage and financing," the economists wrote in the paper. "As the provisions are implemented over time, their actual impacts may well differ considerably from these estimates."