The growth in health care spending is expected to have slowed in 2016 and to remain slow in 2017, due to slower enrollment in government-sponsored Medicaid and a reduction in spending on prescription drugs, according to a report released Wednesday by actuaries from the Centers for Medicare and Medicaid Services.
The report, published in the journal Health Affairs, assumes that President Barack Obama’s health care law, the Affordable Care Act, is still in place. Every year, the Office of the Actuary in the Centers for Medicare and Medicaid Services releases an analysis about how Americans are expected to spend money on health care in the years ahead. The agency will release the final outcomes on 2016 spending at the end of this year, once all the amounts have been tabulated.
The effects of the Affordable Care Act are expected to dwindle in coming years. The report finds that if the law were to continue as is then the share of the insured population would increase from 90.9 percent in 2015 to 91.5 by 2025, as more people become employed in jobs that provide them with coverage.
The slowing of health spending growth by 1.1 percent to 4.8 percent in 2016 is expected to be short-lived as the U.S. population ages, with baby boomers going onto Medicare and likely needing to use more care. Because of these factors, beginning in 2018 both Medicare and Medicaid are projected to grow faster than private insurance spending as income growth slows.
“Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services,” Sean Keehan, the study’s first author, said in a statement.
During a press conference in Washington hosted by Health Affairs, Keehan said that “high cost-sharing is certainly one of the important factors” in driving down how much people with private plans use care, given that they have to consider how much they will shoulder costs themselves in the form of out-of-pocket spending and deductibles.
By 2025, actuaries forecast that health care’s share of the economy will reach 19.9 percent, an increase from 17.8 percent in 2025.
According to authors of the Health Affairs article, “medical price growth is projected to quicken in the coming decade compared to recent history, as both overall prices and medical-specific price inflation grow faster.”
In 2014 and 2015, health care spending had accelerated because the Affordable Care Act’s provisions went into effect: Coverage was expanded to more people and more people used health care. The federal government also chipped in more to help people pay for premiums and to pay for Medicaid for low-income Americans. Prescription drug costs also are expected to slow. In 2014 and 2015, spending surged as the drugs that were approved to treat hepatitis C, a liver disease that can require a transplant if it turns into a chronic infection, hit the market.
By 2016, these effects had slowed. Devin Stone, an economist in for CMS Office of the Actuary, said at the press conference that the projections assume that more drugs will lose their patents, slowing prescription drug costs as more generics become available.
Authors of the projections were forthcoming about the fact that the numbers are likely off target given that future of the Affordable Care Act is mired in uncertainty. Republicans and President Donald Trump have vowed to repeal the law, but lawmakers haven’t yet agreed on the timeline or ways to replace it. Decisions from lawmakers on both sides could alter factors around health spending but could also increase the number of uninsured, despite pledges or efforts not to.
Alan Weil, executive editor for Health Affairs, said the projections were still useful to help inform policy, particularly when it comes to designing ways to respond to the parts of the health care system that are driving price increases.
“This is a baseline and it’s still the law, so knowing where we are going is still important,” he said. “It’s also an important baseline to compare changes to the law. Whether we stick to the law or not, it’s important to know where we would have been.”