US Healthcare Spending Projected to Climb Swiftly

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But spending on Medicare, the government health insurance program for the elderly, is expected to grow between 2017 and 2025 as a larger elderly population requires more medical services.

Under the current system, federal, state and local governments are set to cover 47 percent of national health spending by 2025, up 1 percent from 2015, according to the report.

Actuaries at the Centers for Medicare and Medicaid Services project the average rate of national health spending will grow 5.6 percent between 2016 and 2025, down slightly from their projections past year.

The first two years of the projection period are expected to have the slowest health spending growth rates (4.8 percent in 2016 and 5.4 in 2017), as Medicaid and private health insurance spending growth slow and Medicare spending growth remains low.

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The total amount American households, businesses and the government spent on health care rose less than 6 percent past year, below historic trends, according to new projections from federal auditors.

A report by the U.S. Centers for Medicare and Medicaid Services (CMS) cited the aging of the enormous baby boom generation and overall economic inflation as prime contributors to the projected increase in healthcare spending. This faster expected growth in prices is projected to be partially offset by slowing growth in the use and intensity of medical goods and services. However, the new estimates show Medicaid spending could have "decelerated sharply" (9.7% in 2015 v. 3.7% in 2016) because "enrollment growth in the program slowed significantly". "Irrespective of any changes in law, it is expected that because of continued cost pressures associated with paying for health care, employers, insurers, and other payers will continue to pursue strategies that seek to effectively manage the use and cost of health care goods and services". For 2018 and beyond, Medicare and Medicaid expenditures are expected to grow faster than in the 2016-17 period, and more rapidly than private health insurance spending. Faster expected growth after 2016 primarily reflects utilization of Medicare covered services increasing to approach rates closer to Medicare's longer historical experience. And finally, growth in the demand for health care for those with private insurance is expected to slow as enrollees face gradually rising relative health care prices and slowing income growth. Medical price inflation - the increase in the costs of doctors' visits, drugs and hospital care - has been at low levels, largely due to inflation overall being low after the recession and in part because of the expiration of a temporary payment increase to primary care providers in Medicaid, according to CMS economist Sean Keehan, who led the study. However, that growth is projected to accelerate over the next decade as Americans age and medical prices rise.

Despite the uptick in spending growth that began three years ago, national health care expenditures are on track to rise at a considerably slower rate than in previous decades.

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