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US health spending to outstrip GDP growth

New report predicts spending on healthcare will account for 20.1% of the total US economy by 2025
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The rate of spending on health in the US is set to outstrip the growth of the country's gross domestic product over the next decade, according to a new report.

The Centers for Medicare and Medicaid Services (CMS) said that healthcare spending will grow by an average of 5.8% per year up to 2025, which is 1.3 percentage points faster than GDP growth.

Published in the journal Health Affairs, the report covers the years 2015–25 and says that health spending will account for 20.1% of the total economy by the end of this period, compared with 17.5% in 2014.

The share of total health expenditure paid for by federal, state and local governments is projected to increase to 47% by 2025, the report added.

While this projected rate of national health spending growth is faster than in the last few years, spending has slowed in comparison to the two decades prior to the financial crisis, which was at its height between 2007 and 2009.

The report suggests this is in part due to increasing cost sharing in private health insurance plans and various Medicare payment update provisions.

The recent 'Obamacare' reforms created ripples in the pool of healthcare spending, with millions of Americans gaining health insurance coverage in 2014 under the terms of the Affordable Care Act (ACA). One in five Americans is expected to be covered by Medicare by 2025.

As the CMS points out, this expanded Medicaid eligibility and made subsidised plans available. As a result, health spending growth rose from 2.9% in 2013 to 5.3% in 2014 and the increase in coverage should carry on influencing health spending growth during the first two years of the 2015–25 period.

But as the initial impact of the ACA fades, growth in health spending is expected to be influenced by changes in economic growth, faster growth in medical prices and the fact that the population is ageing.

The rate is expected to be at its highest – around 6.0% - during the latter half of the projection period. But this is still some way below the 8% rate seen in the 20 years up until 2007.

Article by
Adam Hill

15th July 2016

From: Sales, Healthcare

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