CBO and CMS Provide Healthcare Spending Projections

by King & Spalding
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CMS and the Congressional Budget Office (CBO) each recently released reports projecting healthcare spending over the next several years.  In CBO’s annual long-term budget outlook, which was released on September 17, the agency analyzed, among other things, federal spending on healthcare programs, such as Medicare and Medicaid.  According to CBO, net spending on government healthcare programs is expected to grow from around 4.6 percent of gross domestic product (GDP) in 2013 to 8 percent of GDP in 2038.  CBO noted that, relative to other periods, healthcare spending has grown more slowly in recent years.  It is not clear whether the recent slowdown is attributable to weakness in the economy or healthcare reform, the CBO report said.  Nevertheless, CBO projects the growth rate of government health spending to increase in the coming years due in part to greater enrollment in government healthcare programs.  For example, CBO projects that as a result of the aging population, the number of Medicare beneficiaries will grow by more than one-third in the next ten years.  The CBO report also looked at projected totals for nationwide healthcare spending—i.e., combining government and private payor sources—and said that, as a share of GDP, total national healthcare spending is expected to rise from about 16 percent today to 22 percent in 2038.

According to CMS’s report, annual growth in national healthcare spending through 2013 will remain “slow”—around 4 percent—primarily due to the lingering effects of the recent recession.  CMS also noted that an increase in cost-sharing requirements under private insurance plans and slow growth in public programs contributed to the relatively low level of spending growth in recent years.  CMS, however, projects that the implementation of portions of the Affordable Care Act (ACA) in 2014, among other factors, will cause growth to increase to 6.1 percent next year.  Over the report’s 2012-2022 projection period, CMS estimates an average annual growth rate of 5.8 percent for healthcare spending, which is a percentage point higher than the average estimated annual economic growth rate for that period.  CMS attributes a “rebound” in the pace of national healthcare spending over the period from 2014 through 2022 to an improving economy, broader coverage under the ACA, and an aging population.  CMS’s recent report also provides spending estimates broken down by medical services and goods, and by payor sources.  CMS will publish its report in the October issue of Health Affairs.

Reporter, Greg Sicilian, Atlanta, +1 404 572 2810, gsicilian@kslaw.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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