Becker's Hospital Review

16 FINANCE 10 Things to Know About the Latest Healthcare Spending Projections By Molly Gamble and Emily Rappleye U .S. health spending in 2014 totaled $3.1 trillion, according to figures from CMS' Office of the Actuary last month. Here are 10 things to know about the latest figures and how experts are reacting. 1. Healthcare spending grew 5.5 percent in 2014. at's the first time growth exceeded 5 percent since 2007. 2. CMS actuaries said growth in healthcare spending will increase at a faster pace than the economy for the next 10 years. e share of the economy that goes toward healthcare will increase from 17.4 percent in 2013 to 19.6 percent in 2024. 3. July's numbers represent a change from the past five years. e increase in healthcare spend- ing dipped dramatically during the economic recession in 2007 through 2009. en, for the following several years, spend- ing growth was relatively aligned with the recovering economy. e average annual growth rate was 4 percent in the period from 2008 to 2013. 4. e increase in spending growth last year is driven by three forces, according to Medicare fore- casters: expanded insurance cover- age under the Affordable Care Act, the aging American population and a recovering economy. 5. Another factor that contributed to faster projected health spending growth in 2014: A rise in prescrip- tion drug spending growth, which is projected to have accelerated from 2.5 percent in 2013 to 12.6 percent in 2014. 6. Health economists have debat- ed whether the healthcare spend- ing slowdown was cyclical, related to the Great Recession, or struc- tural, related to policy changes and a less wasteful healthcare system. Now experts are turning an eye to see if spending growth will exceed pre-recession levels, or remain there or slightly lower. 7. ese spending projections can be seen as positive or negative, depending on the point of view. Economist Douglas Holtz-Eakin, PhD, president of center-right think tank American Action Forum, told e Washington Post he was not optimistic. "e main point is that the bill will continue to grow faster than the economy, which is what pays the bill," Dr. Holtz-Eakin told e Washington Post. "e next president faces the task of reining in the growth of federal entitlement spending." 8. Other economists like Charles Roehrig, PhD, a vice president at health research group Altarum Institute, see the glass half full. Dr. Roehrig told e New York Times projected spending may have been overstated. "I think that if we get back onto the path we were on before the recession, which was a steadily declining excess growth rate, that we ought to be able to get below" the estimate, he said in the report. 9. e report also projected 78.1 million Medicaid enrollees and 70.3 million Medicare enrollees by 2024, according to e Wall Street Journal. e increase in Medi- care enrollees in particular could trigger increased costs and action from the Independent Payment Advisory Board, WSJ speculates. is panel is meant to make spending cuts if Medicare exceeds certain cost growth, which the actuaries say could happen as soon as 2017, according to WSJ. 10. e accuracy of these projec- tions, while improved in recent years, tends to be less accurate the farther into the future a projec- tion speculates, according to Tom Getzen, PhD, executive director of the International Health Econom- ics Association, who published an analysis of expenditure projec- tions. In his analysis, Dr. Getzen says the numbers to put the most stock in are those that show pro- jections of growth as a portion of GDP, rather than those that show spending as a dollar figure over a period of time. n

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