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CMS releases national health spending projections through 2021

Between 2011 and 2021, national health spending is projected to grow at an average rate of 5.7 percent annually, according to projections set forth in a study done by the Centers for Medicare and Medicaid Services’ National Health Expenditure Accounts Team and published in the July issue of Health Affairs.

[See also: CMS 2010 payment proposals disappoint hospitals, physicians]

The study, which was released Tuesday, projects that the average annual growth rate between 2011 and 2021 is 0.9 percent faster than the expected annual increase in the gross domestic product during this period.

According to Sean Keehan, a senior economist in the Office of the Actuary at CMS, during a media briefing on Tuesday, between 2011 and 2013, U.S. health spending is projected to grow on average at 4 percent, which is slightly above the historically low growth rate of 3.8 percent in 2009. Preliminary data suggest that growth in consumers’ use of health services remained slow in 2011, with the pattern expected to stay similar in 2012 and 2013. In these years, the lingering effects of the economic recession and modest recovery, mostly in the form of limited growth in incomes, are expected to continue to constrain health spending growth.

“In 2014, health spending growth is expected to accelerate to 7.4 percent as the major coverage expansions from the Affordable Care Act begin,” said Keehan.

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“During this period, the Affordable Care Act is projected to reduce the number of uninsured people by 30 million; to add approximately 0.1 percentage point to average annual health spending growth; and to add about $478 billion in cumulative health spending,” according to the study.

In addition, these expansions are expected to increase the number of people with health insurance and the demand for healthcare (particularly prescription drugs and physician care).

Also, rising government spending on healthcare 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.

“By 2021, federal, state and local government healthcare 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,” said the report.

In addition to examining the effects of national health reform legislation, the report discusses the impact of higher cost-sharing on private health insurance and out-of-pocket health spending. It also examines the effect on Medicare and physician health spending growth if the significant reduction in Medicare physician payment rates in 2013 under current law is overwritten.

[See also: CMS adds 23 organizations to Medicare post-discharge transition program]

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