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Per-Capita Health Spending Likely to Top $10,000 for First Time

By Kerry Young, CQ Roll Call

July 13, 2016 -- Spending on health care in the United States is expected to inch past $10,000 per person for the first time this year, due in part to the rising tab for hospital care, insurance administrative costs and prescription drugs.

The Centers for Medicare and Medicaid Services (CMS) on Wednesday released national health expenditure projections showing the cost of health care rising to $10,346 per person this year, up from $9,960 last year. The widely followed CMS report provides insights into how the aging population and recent laws have changed medical spending and may continue to do so in the future.

The nation is facing what the CMS staff called "differential pressures on health spending growth" in a paper published in the journal Health Affairs. Congress has enacted several measures that include curbs on Medicare spending, including the sequester triggered by the 2011 budget deal (PL 112-25) and the 2010 health overhaul (PL 111-148, Pl 111-152). Yet the overhaul also has helped many Americans obtain insurance and thus get costly treatments they might not otherwise have been able to afford.

"Economy-wide and medical-specific price growth have been very low, helping restrain inflation’s impact on health spending, and the Medicare program is experimenting with various alternative payment approaches," wrote Sean P. Keehan, a CMS economist who is the paper's lead author, and his colleagues. "Meanwhile, many Americans are gaining access to health coverage for the first time, aging into Medicare, or finding that a greater share of their health expenses needs to be paid out of pocket."

The balance of cost-control efforts against rising demands for medical care appears to be stabilizing the growth of national health expenses for now. The total tab for health care rose 5.5 percent last year to $3.2 trillion, with the growth rate little changed from the 5.3 percent increase in 2014.

Contributors to this year's expected increase were hospital costs, which rose to nearly $1.1 trillion from more than $1 trillion. The tab for prescription drugs climbed to $342 billion from $322 billion. The net cost of health insurance rose to $220.4 billion from $209.7 billion.

Looking out to 2025, the growth rate for national health expenditures may inch up to 6 percent. CMS staffers noted that the growth rate of health care in recent years has lagged the annual increases of nearly 8 percent that were seen in the two decades preceding the 2007-2009 recession.

A major contributor to the continued growth of health costs will be Medicare, with spending expected to grow faster than that of other large insurers, averaging 7.6 percent in the 2020–2025 period. Baby boomers are aging into eligibility for the program, while people already in the program are getting hospital care and doctors’ offices at higher rates than have been seen recently.

By 2025, about one in five Americans will be enrolled in the Medicare program for senior citizens and people with disabilities. That's 72 million enrollees in a national population of 351 million, the CMS staff said. The program now covers 55.8 million enrollees, with the U.S. population at about 329 million.

Other key findings from the report include:

  • CMS expects the number of people without health insurance to drop to 8 percent in 2025 from about 11 percent in 2014.
  • Medical prices will likely rise by about 2.4 percent per year from 2017 to 2019. Growth for 2016 was estimated at 1.5 percent.
  • Expenses for private health insurance increased by 5.1 percent from 2014 to 2015, reaching $1 trillion. Average annual growth through 2025 is expected to be a similar rate of roughly 5.4 percent, CMS said.

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