How much is health spending expected to grow?

U.S. health care spending per capita has risen at historically low rates recently, but is expected to pick up Average annual growth rate of health spending per capita for 1970’s – 1990’s; Annual change in actual health spending per capita 2000 – 2013 and projected health spending per capita (2014 – 2024) Health spending in the U.S. has grown at historically low levels since 2008, likely due to a combination of the economic downturn and slow recovery and higher patient cost-sharing, as well as structural changes to the health system. Projections published on Health Affairs by the Centers for Medicare and Medicaid Services (CMS), however, suggest that health-spending growth is picking back up, averaging over 5% per year on a per capita basis from 2014 – 2024. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Growth in prescription spending had slowed, but increased rapidly in 2014 and 2015 Average annual growth rate of prescription drug spending per capita for 1970’s – 1990’s; Annual change in actual prescription drug spending per capita 2000 – 2014 and projected prescription drug spending per capita 2015 - 2024 New specialty drugs are having an upward effect on spending, according to CMS, echoing other analyses by PwC, Express Scripts and IMS Health. In 2014, pharmaceutical spending is estimated to have grown 12.2% (11.4% on a per capita basis), driven in part by a surge in spending on Sovaldi and other specialty drugs, but analysis of CMS projections suggests growth in per capita drug spending will decelerate to 9.6% in 2015 and 5.9% in 2024. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) Historical (1960-2014) and Projected (2014-2024) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (Accessed on December 7, 2015) Note: 2014 to 2015 percent changes are calculated using 2014 actual and 2015 projected amounts.

Per capita out-of-pocket spending is projected to grow at very low rates in 2014 and 2015 Average annual growth rate of health spending per capita for 1970’s – 1990’s; Annual change in actual health spending 2000 – 2013 and projected health spending (2014 – 2024) The insurance coverage gains in 2014, and to a lesser extent in 2015, have given more people access to health care, which is likely increasing overall spending. Although total health spending is expected to pick up in 2014, this is not the case for out-of-pocket spending. Per capita out-of-pocket costs are projected by CMS to have grown at very low rates in 2014 (0.6%) and 2015 (1.3%), in part because more people are protected by insurance. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Out-of-pocket spending on hospital care fell in 2014, but grew for Rx drugs Actual per capita out-of-pocket health spending 2000 – 2014, and projected per capita out-of-pocket health spending (2015 – 2024) on hospitals, physicians and clinics, and retail prescription drugs Per capita out-of-pocket spending dropped in 2014 for hospital care and physician services, by -4.8% and -0.4% respectively. However, per capita out-of-pocket spending on prescription drugs is estimated to have grown by 1.9% in 2014. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) Historical (1960-2014) and Projected (2014-2024) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (Accessed on December 7, 2015)

An annual percentage point difference in growth rates makes a very large difference in spending over time Projected annual change in U.S. per capita health spending 2014 – 2024, alternative scenarios What may seem to be small differences in growth rates are very meaningful over time. Per capita expenditures are projected to grow from $9,695 in 2014 to $15,618 in 2024, which is an average annual growth rate of about 5 percent. If growth rates were 1 percentage point lower each year over that same period, per capita spending would be $1,427 lower than expected. If growth rates were 1 percentage point higher each year, per capita spending would rise to $17,173 in 2024, which would increase total health spending by over $500 billion in 2024 alone and by about $2.5 trillion in the 10-year period. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Health spending projections are now lower than previous projections CMS projections of national health expenditures, in US $ millions, predicted based on baseline year Health spending is now projected to be lower than had previously been expected. The CMS 2010 baseline projections (which were published in 2011 and reflected changes as a result of the Affordable Care Act) put total national health expenditures at over $4.6 trillion in 2020, whereas the most recent projections (published in 2015) put 2020 total national health expenditures at less than $4.3 trillion. Over the course of the 11 year period, that amounts to a difference of nearly $1.9 trillion. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

Long-term health spending is difficult to project CMS projections of national health expenditures, predicted based on baseline year Longer-run trends are harder to predict, and this is particularly true in a time when the health system is changing rapidly. When CMS published the 2005 baseline projections (in 2006), health spending was then expected to reach more than $3.5 trillion by 2013 and over $4 trillion by 2015. Actual health spending has been much lower, at $2.9 trillion in 2013, and is now expected to reach $3.2 trillion by the end of 2015. Part of that difference was likely due to policy changes in the Affordable Care Act, which was not anticipated in 2006. Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group