New gov't report predicts healthcare cost escalation

Healthcare spending will likely make up 19.3 percent--nearly a fifth--of the U.S. economy by 2023, despite a temporary recent lull in steep growth, according to the latest government report. This is up from 17.2 percent in 2012.

The Centers for Medicare & Medicaid Services Office of the Actuary released a report Sept. 3, written by nonpartisan experts and published in Health Affairs that shows healthcare spending will pick up starting this year and beyond.

Factors contributing to the short-term growth will include the introduction of expensive new drugs for hepatitis C, increased insurance coverage under the Affordable Care Act, projected economic growth and population aging.

The report projects that spending will grow by an average of 6 percent a year from 2015-2023, a notable acceleration after five consecutive years, through 2013, of annual growth below 4 percent, according to the Associated Press.

"The outlook for this past year is still pretty good," writes Jason Millman in the Washington Post's Wonkblog. "Health spending is projected to have grown just 3.6 percent in 2013, which would mark the fifth straight year that annual growth remained under 4 percent, based on new 2013 projections from CMS's Office of the Actuary, which offers a detailed outlook each year," he says.

Although the coming bout of health-cost inflation is not expected to be as aggressive as in the 1980s and 1990s, it will still pose a dilemma for President Barack Obama's successor. Long term, much of the growth comes from Medicare and Medicaid, two giant government programs now covering more than 100 million people, AP noted.

The White House administration may take comfort that the report does not foresee a return to inflation rates of 7 percent a year or more. "We are not projecting that growth will get back to its rapid pace of the '80s and '90s," Sean Keehan, a senior economist who worked on the report, told AP.

Other experts have predicted medical spending will grow faster than the economy during the next 20 years, FierceHealthPayer previously reported.

To learn more:
- see the Health Affairs article
- read the AP story
- here's the blog