Medicare Compliance & Reimbursement

Federal healthcare spending will add a hefty chunk to the Gross Domestic Product (GDP), a new CMS report suggests.

Between 2018 and 2027, the feds anticipate that national health expenditure growth will “average 5.5 percent annually ... reaching nearly $6.0 trillion by 2027,” says a CMS Office of the Actuary release. The health spending growth will sail past the GDP by 0.08 percent during that time period, with “the health share of GDP to rise from 17.9 percent in 2017 to 19.4 percent by 2027,” the CMS report notes.

Why? Two reasons factor into increases in enrollment and spending, according to CMS. Demographics and economics play a role as baby boomers transition into Medicare over that time period. Due to evidence from past Actuary research, the cost of healthcare is expected to rise by 2.5 percent from 2018 to 2027, the agency surmises.

The report highlights several areas where substantial growth in healthcare enrollment and spending is forecast. An aging population and wage increases should bump up physician and clinical services’ outlays by 5.4 percent, indicates the Actuary report.

Important: While Medicaid and private payer spending are anticipated to rise at 5.5 percent and 4.8 percent respectively, Medicare is presumed to top both with an average of “7.4 percent over 2018-2027,” CMS says. “Underlying the strong average annual Medicare spending growth are projected sustained strong enrollment growth as the baby boomers continue to age into the program and growth in the use and intensity of covered services that is consistent with the rates observed during Medicare’s long-term history,” the release stresses.

Hospital spending is slated to grow at an average of 5.6 percent during the aforementioned time period while prescription drug growth is expected to accelerate with an average of 5.6 percent.

One of the main reasons for the drug spending acceleration is due to “efforts on the part of employers and insurers to encourage better medication adherence among those with chronic conditions” as well as “changing pharmacotherapy guidelines,” more private payer input, and drug innovation, CMS says.

See the CMS Office of the Actuary release at www.cms.gov/newsroom/press-releases/cms-office-actuary-releases-2018-2027-projections-national-health-expenditures.