U.S. healthcare spending is projected to grow by an annual average rate of 5.4% between 2019 and 2028, compared to an average of 4.5% a year between 2016 and 2018, according to an annual federal report.
The expenditures on products and services ranging from medicines to hospital care are projected to climb from approximately $3.6 trillion in 2018 to almost $6.2 trillion by 2028, fueled by increasing costs, according to the report published March 24 by the health policy journal Health Affairs.
The National Health Expenditure Projections report is an annual study conducted by the U.S. Centers for Medicare and Medicaid Services' Office of the Actuary. In 2019, researchers at the agency projected that spending would increase by 5.5% between 2018 and 2027.
The prices of healthcare goods and services will rise by an annual average rate of 2.4% between 2019 and 2028, compared to the rate of 1.3% between 2016 and 2018, the researchers estimated.
Healthcare spending grew 4.6% in 2018, totaling about $3.6 trillion, according to a CMS report issued in December 2019.
Between 2019 and 2028, healthcare spending growth is expected to outpace the annual growth rate for U.S. gross domestic product, which is projected to average 4.3% over the same period. Total healthcare spending is estimated to represent about 19.7% of GDP in 2028, up from 17.7% in 2018.
Personal healthcare spending is projected to grow on average by 5.5% per year between 2019 and 2028, compared to 4.8% from 2014 to 2018 and 4% from 2008 to 2013.
Federal spending to climb
Medicare spending is projected to increase by an annual rate of 7.6% between 2019 and 2028, the highest among other top U.S. healthcare payers including private insurance and the government-run Medicaid program. Medicare is the federally run health insurance program for people over the age of 65, those who have disabilities or people with end-stage renal disease.
Overall, Medicare spending is projected to increase from $750.2 billion in 2018 to approximately $1.6 trillion in 2028. Expenditures for Medicaid, which covers people with low incomes, are projected to grow from $597.4 billion to about $1 trillion over the same period.
Private health insurance provided by companies like UnitedHealth Group Inc. and Anthem Inc. will account for more spending than other payers, growing from $1.2 trillion in 2018 to nearly $2 trillion by 2028.
The surge in Medicare spending is primarily due to a projected 2.5% annual average increase in the number of beneficiaries between 2019 and 2028, fueled by the aging baby-boomer generation, according to the report. Over the same period, enrollment in Medicaid is projected to increase by an annual average rate of 1.1% and enrollment in private insurance by an annual average rate of 0.3%.
The small growth in private insurance enrollment is related to the effective repeal of the Affordable Care Act's individual mandate, according to the report. The U.S. insured rate is projected to slightly decrease to 89.4% by 2028 from 90.6% in 2018.
Spending by federal, state and local governments is expected to climb from about $1.6 trillion in 2018 to $2.9 trillion by 2028, growing to 47% of all outlays from 45% over this period. The portion of total spending from businesses, household and other private revenues is projected to decrease to 53% by 2028 from 55% in 2018.
Growth in hospital, drug spending
Hospital spending is expected to grow from almost $1.2 trillion in 2018 to just over $2 trillion in 2020, both of which are about one-third of total spending.
The CMS researchers projected that hospital spending growth will accelerate to 5.1% in 2019 from 4.5% growth in 2018. The growth rate is then expected to remain at 5.1% in 2020 before increasing to 5.9% per year between 2021 to 2023 and 6% per year between 2024 and 2028.
The researchers said higher Medicare and Medicaid spending are driving the increase in hospital care expenditures.
National spending on prescription drugs is projected to grow from about $335 billion in 2018 to $560.3 billion in 2028. After the annual growth rate increases from 2.5% in 2018 to 3.7% in 2020, the average growth rate is projected to jump to 5.4% from 2021 to 2023 and 5.9% from 2024 to 2028.
These projections are slightly lower than the 6.1% annual average growth rate from 2020 to 2027 that CMS projected in 2019.
Drug price increases and higher drug usage are some of the drivers of the overall increase in spending, according to the report.