Medicare Compliance & Reimbursement

Federal spending will rise; personal spending may fall.

The Centers for Medicare & Medicaid Services' (CMS) Office of the Actuary has released a report detailing "National Health Expenditure Projections 2006-2016," and it contains news that may encourage privatized health-care purchasers and frustrate taxpayers.
 
In the next 10 years the United States will double its spending on health care, according to CMS actuaries. Spending for 2006 should total $2.1 trillion, but that number stands to rise to $4.1 trillion in 2016. That level of growth would consume almost 20 cents of every federal dollar spent, report federal forecasters with Health Affairs.

While the predicted rise in health care spending may dismay taxpayers, growth in health care spending has actually slowed slightly, says CMS. Health-care spending growth should drop from 6.9 percent in 2005 to 6.8 percent in 2006. If 2006 growth does indeed drop, it would mark the fourth consecutive year in which federal spending growth decreased.

Some analysts indicated that spending growth could be curbed more noticeably in the future as a result of current and ongoing changes to Medicare, such as those in Part D. "Although recent changes in health-care spending growth have been modest, some of the most dramatic changes taking place are the shifts in payment distribution in Medicare, Medicaid and the private insurance industry as Medicare Part D is fully implemented," said John Poisal, deputy director of the National Health Statistics Group at CMS.

Out-of-pocket costs for consumers should also increase over the 10-year period. Consumers spent $250 billion in 2006, and that number could climb to $440 billion by 2016, according to the CMS report. Though that increase in actual spending might seem formidable, it really represents a spending decrease when spending is measured as a percentage of income.

Consumers had to allot approximately 27 percent of their income to out-of-pocket health care costs in 2005; analysts expect that number will drop to 26 percent for 2006 and may sink as low as 25 percent in 2016.

The report also contained several other points of note:

· Home health care spending appears likely to sustain a 7.6-percent growth rate through 2016, making that sector the fastest-growing area of health care;

· As generic-drug dispensing rates level off and the Food and Drug Administration approves new drugs to treat cancer, prescription drug spending should maintain a growth rate of 8.6 percent until 2016;

· Despite an expected surge in aging baby boomers, nursing home spending should actually decelerate in 2006 from 6 percent to 3 percent; and

· Private health insurance premiums should drop to 4.4 percent in 2006, and at least 1.4 percent of that drop can be attributed to savings from Medicare Part D.