Health care spending is projected to rise by 5.3% in 2018 and continue at about that growth rate through 2026, according to estimates from the US Centers for Medicare and Medicaid Services (CMS). At the projected rates, spending on health care will represent nearly 20% of the US gross domestic product (GDP) by 2026, up from 17.9% today.
According to the report from the CMS Office of the Actuary, the estimated increases are driven by 2 major factors: an aging US population that will increase Medicare spending, and an inflation rate on medical goods and services provided directly to patients that will outpace the overall economy's rate of inflation—2.2% compared with 1.1% annually.
The average 5.5% annual growth in spending is higher than both the post-Great Recession rate of 3.8% from 2008 to 2013 and the 5% uptick related to the startup of the Affordable Care Act from 2014 to 2016—but it's still lower than the 7.3% annual increases experienced from 1990 to 2007, according to the report.
Among other findings in the report:
- Medicare spending will be the fastest-growing of all health insurance categories, increasing by 8% between 2019 and 2020, and 7.7% annually between 2021 and 2026. In contrast, private insurance is projected to grow at a slower 4.7% rate.
- Part of the expected slower growth of private insurance can be attributed to an increased prevalence of high-deductible plans and the 2022 implementation of a tax on high-cost insurance plans, a tax that the CMS actuaries believe will spark employers to offer employee health insurance with reduced benefits and higher cost-sharing.
- Prescription drugs will lead the way in increases to goods and services provided to patients, with a projected annual increase of 6.3% from 2017 to 2026.
- The share of the population with health insurance will likely decline, from 91.1% in 2016 to 89.3%, the result of the elimination of the individual mandate for health insurance.
- By 2026, government-sponsored efforts will represent 47% of all health care expenditures, up from today's 45% share. The portion of expenditures shouldered by private insurance is predicted to drop from 55% to 53% by 2026.