CMS: Government payers’ share of healthcare spending to reach 47% by 2027 

Medicine Money
CMS economists say increased Medicare enrollment is the trend to watch over the next decade. (Getty/utah778)

Government payers’ share of healthcare spending is set to increase by two percentage points over the next decade, reaching 47% by 2027, according to new data from the Centers for Medicare & Medicaid Services. 

CMS' Office of the Actuary released its annual National Health Expenditure Projections report on Wednesday, and it estimates that a significant increase in Medicare enrollment will drive that trend over the next several years. 

The aging population is major factor in other trends as well, according to the report, including a slowdown in spending in Medicaid this year. CMS estimates that 73.5 million people will be enrolled in Medicare by 2027, up from 57.2 million in 2017.

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

“In short, we expect that health spending over the next decade will be driven by long-observed demographic and economic factors that are fundamental to the health sector,” Andrea Sisko, Ph.D., an economist at CMS and one of the report’s authors, said in a briefing with reporters. 

RELATED: Healthcare spending slows for 2nd consecutive year, remains at 18% of GDP 

The actuaries’ projections are on par with last year’s report, which also highlighted increasing Medicare enrollment as the major spending driver in the near term. CMS projects that healthcare spending will grow by 5.5% on average each year through 2027, reaching 19.4% of gross domestic product. It also estimates that insured rates should remain stable at about 90% through that same window. 

Spending in Medicare will increase by an estimated 7.1% in 2019 and then by 7.6% annually on average between 2020 and 2027, according to the report. Medicaid spending, by contrast, is projected to increase by 4.8% this year and then by an average of 6% annually through 2027. 

Medicaid spending will pick up as several additional states expand the program, the actuaries said on the press call. CMS projects Medicaid enrollment to reach 82.5 million by 2027.

Spending growth in private insurance could drop to 3.3% this year from 4.5%, a trend the actuary says is likely backed by the repeal of the individual mandate. The CMS economists estimate that younger, healthy people may choose to forgo coverage without the tax penalty.

Despite that, CMS does expect enrollment in private plans to increase slightly overall, from 197.3 million in 2017 to 202.1 million by 2027.

RELATED: Spending in employer-sponsored plans hits all-time high, Health Care Cost Institute finds 

Between 2020 and 2027, CMS estimates that spending on prescription drugs will increase by 6.1%, with increased utilization pushing that trend. However, the report cautions that the projections do not account for policy changes in the pipeline, including the Department of Health and Human Services’ proposal to eliminate drug rebates and significantly overhaul pharmaceutical pricing and the supply chain. 

Sean Keehan, an economist at CMS and another of the report’s authors, said that a trend the actuary is watching in this area is how employers and private plans are working toward better chronic care management.

Suggested Articles

Outpatient specialty drugs can be a lucrative income source for not-for-profit hospitals, but Washington presents some risks, Moody's says.

Errors in diagnostic tests and medication safety events pose the biggest risk to patients in ambulatory care settings, according to a new analysis.

Healthcare innovation network AVIA has secured $22 million in its latest funding round.