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Health Care Spending Forecast To Increase Modestly

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Better economic conditions, the aging of the baby boomer generation into Medicare and increased number of people with insurance are expected to result in greater demand for health care goods and services, increases in health coverage and faster rates of spending growth, in particular for private health insurance, the researchers said. 

Those trends, the researchers said, will be countered by somewhat slower growth in Medicare payment rates mandated by the health law, cuts made to hospitals and doctors in the congressional budget-cutting efforts and the increasing use of higher deductibles in private insurance plans that have cut down on consumer health spending.

The number of uninsured people is projected to fall from about 45 million in 2012 to 23 million by 2023, according to CMS actuaries.

Other key takeaways from the CMS report include:

-- Medicare spending growth slowed from 4.8 percent in 2012 to 3.3 percent in 2013. That was caused by the automatic 2 percent payment cuts known as sequestration and other payment adjustments, especially reductions in federal payments to the private Medicare Advantage plans that offer an alternative to traditional Medicare. Late last month, the Congressional Budget Office estimated that lower costs for medical services and labor will help reduce both Medicare and Medicaid spending over the next decade.

Continued movement of baby boomers in to the program and more spending on older beneficiaries will cause Medicare expenditures to rise 7.9 percent in 2020, according to the CMS report.

-- Medicaid's growth rate is expected to rise from 3.3 percent in 2012 to 6.7 percent in 2013, reflecting the health law’s Medicaid expansion – which is optional for states – and the effect of the law's temporary payment increase for primary care physicians, among other factors. The researchers forecast that Medicaid spending will spike nearly 13 percent in 2014 but the growth rate will fall back to 6.7 percent the following year.

-- In 2014, private health insurance premiums are projected to grow 6.8 percent, largely a result of higher per-enrollee spending and increased insurance coverage through the health law's online marketplaces, or exchanges, and individually purchased insurance. For 2016-23, average premium growth for private health insurance is projected to be 5.4 percent per year.

-- For 2016-2023, faster increases in disposable personal income and greater enrollment in private health insurance will contribute to the projected 6.1 spending growth per year for health care services, faster than the 4.7 percent average growth expected for 2013-15.  But those conditions are likely to change, researchers warned.

“Consistent with the historical relationship between health spending and economic cycles, these projected changes in the economy are expected to influence health expenditure growth with a lag,” resulting in a projected peak growth in health spending of 6.6 percent in 2020, CMS said.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Wed, Sep 3 2014

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